Glossary · Funding
What is Payroll funding
Also called: payroll finance, contractor funding.
Definition
A facility that pays your contractors each week and is repaid when your client settles the invoice, removing the cash gap from the agency's balance sheet.
Applies to: US and UK · Reviewed by James Doyle
In practice
Payroll funding is priced on the funded amount, usually as a discount fee plus a margin over base rate, and is often bundled with back-office processing — timesheets, invoicing, credit control.
It is the difference between a desk that can place twenty contractors and one that stalls at five. The cost is real, but it is cheaper than equity and far cheaper than declining a rollout.
Common mistake
Reading the headline discount rate only. Minimum-term clauses, concentration limits and bundled back-office fees usually move the true cost more than the headline percentage does.
Related terms
Invoice factoring
Selling your unpaid invoices to a funder at a discount for immediate cash. The funder advances most of the invoice value, then pays the balance on settlement.
ReadWorking capital
The cash an agency must hold to pay contractors before clients pay invoices. It is the real startup cost of a contract staffing business.
ReadConcentration limit
A cap on how much of your funded ledger can sit with one client, commonly 25% to 35%. Invoices above the cap are funded at a lower rate or not at all.
ReadAdvance rate
The percentage of an invoice a funder releases immediately. The remainder is held back as a reserve until the client pays.
Read
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