US · Funding
What do factors check before approving a staffing facility?
The underwriting checklist for staffing invoice finance: client credit, contracts, payroll tax status, timesheet evidence and concentration.
The short answer
Factors underwrite your clients, not you. They check debtor credit quality, your terms of business and client contracts, timesheet and approval evidence, payroll tax compliance, existing liens, and client concentration. Unpaid payroll taxes and unsigned client terms are the two most common reasons a staffing facility is declined.
Key facts
- Primary underwriting basis
- Your clients' creditworthiness
- Common concentration limit
- Advance restricted above 20–40% in one debtor
- Instant declines
- Payroll tax arrears, existing UCC liens, no signed terms
- Typical time to facility
- 1–3 weeks
Staffing invoice finance is a credit product on your customers. That is good news for a new founder — the eighteen-month-old agency with a hospital system as a client is funding a hospital system's credit, not its own — but it means the diligence lands on paperwork you may not have prioritised.
The two hard stops are payroll tax arrears and unreleased liens. Both put a funder behind someone else in a recovery, and neither is negotiable. If you have taken a merchant cash advance to bridge a payroll, disclose it early; discovering it in diligence ends the conversation.
Evidence quality drives the advance rate. Clean, client-approved timesheets that reconcile to invoices support a 90 to 95 percent advance. Manual timesheets, disputed hours and credit notes reduce the advance and increase the reserve, which is a real cash difference every week.
Concentration is the third lever. Funders cap exposure to a single debtor, so if one client is seventy percent of your book, part of that invoice value simply will not be advanced. Knowing the cap before you sign a large account changes how you plan the payroll.
Finally, read the notice and minimum-fee terms. A twelve-month facility with a ninety-day notice period and a monthly minimum is a commitment, and refinancing early can cost more than the rate difference you were chasing.
Step by step
01
Get your terms signed
Every client needs countersigned terms of business with clear payment terms and an assignment clause that permits factoring.
02
Clear payroll taxes
Federal and state payroll tax arrears rank ahead of a funder's security and will stop an application immediately.
03
Check for existing liens
A UCC filing from an earlier lender or merchant cash advance must be released or subordinated.
04
Prepare debtor information
Client names, credit terms, historical payment behaviour and an aged receivables report.
05
Show the timesheet trail
Approved timesheets tied to invoices are the evidence the facility funds against; funders want to see the workflow, not a promise.
06
Model concentration
If one client is most of the book, expect a lower advance on that debtor and plan the cash accordingly.
Run the numbers
Model your advance and reserve
Test advance rates, fees and payment terms against your weekly payroll.
Open the calculatorUnited States
How this differs by US state and metro
The answer above holds nationally. What changes locally is registration, insurance, wage rules and how much cash each contractor consumes — these are the states and metros founders ask us about most.
Florida
Miami · Orlando · Tampa
Florida hospitality and healthcare clients frequently pay on 45 to 60 day terms while the workers are paid weekly. Seasonal peaks mean your largest payroll weeks and your slowest collection weeks can arrive together — size the facility for the peak, not the average.
Florida guideIllinois
Chicago · Naperville · Rockford
Illinois compliance costs are front-loaded, and light industrial margins are thin, so the funding line has to cover both the payroll gap and the administrative load. Model the long-assignment pay step-up into your bill rate from day one or it will eat the margin later.
Illinois guideOhio
Columbus · Cleveland · Cincinnati
Ohio's industrial base runs high headcount at moderate bill rates. That combination means the cash gap grows fast while margin per contractor stays modest, so a factoring line sized to invoice volume usually beats trying to self-fund.
Ohio guideGeorgia
Atlanta · Savannah · Augusta
Atlanta is a competitive, relationship-led market where clients push payment terms. Agencies that grow here usually secure a factoring facility early, because a single large logistics client can double your payroll requirement in a fortnight.
Georgia guideLocal questions
Does this change if I start in Florida?
The national answer holds. What changes in Florida is local: Florida hospitality and healthcare clients frequently pay on 45 to 60 day terms while the workers are paid weekly. Seasonal peaks mean your largest payroll weeks and your slowest collection weeks can arrive together — size the facility for the peak, not the average. Check the Florida page before you register anything, and model the cash gap on Florida pay rates rather than national averages.
Is the answer different in Illinois than in Florida?
The economics are the same shape; the local detail is not. In Illinois: Illinois compliance costs are front-loaded, and light industrial margins are thin, so the funding line has to cover both the payroll gap and the administrative load. Model the long-assignment pay step-up into your bill rate from day one or it will eat the margin later. That affects your registration checklist and your working capital number, not the underlying principle.
Which US cities does this apply to?
All of them — but we publish metro-level bill rate, wage and startup cost detail for Columbus, Cleveland, Cincinnati, Atlanta and more, because pay rates and buyer mix vary far more between metros than between states.
Do I need a separate licence in every state I place in?
You register where you have employees and where you do business, not once nationally. Most states require unemployment insurance and withholding registration plus workers' compensation cover; a minority licence employment agencies, and some cities — New York City among them — licence separately from the state. Confirm each state and city before your first placement there.
Sources
General information for recruitment and staffing founders, not legal, tax or accounting advice.
Go deeper
Invoice factoring for staffing agencies: how it works and what it costs
How invoice factoring works for US staffing agencies: advance rates, discount and service fees, recourse versus non-recourse, notified versus confidential, and how to compare term sheets properly.
Want this answered for your business, not in general?
Apply and we will match you with an operator who has already built a recruitment or staffing business of your shape — and with the investors worth having.