# What is working capital?

Source: https://launch-rec.com/glossary/working-capital. Category: Funding. Market: US and UK.

## Definition

The cash an agency must hold to pay contractors before clients pay invoices. It is the real startup cost of a contract staffing business.

## In practice

Contractors are paid weekly. Clients pay on 30 to 60 day terms. That gap — often a 52-day cash cycle in practice — has to be funded by someone, and it grows every time you place another contractor.

Setup costs for a staffing agency are modest, commonly around $9,000 for entity, insurance, contracts and software. Ten contractors on a 52-day cycle can require six figures of working capital. Growth, not failure, is what runs contract agencies out of cash.

## Worked example

10 contractors × $1,350 weekly burdened cost × 7.4 weeks ≈ $100,000 of cash tied up before the first invoice clears.

## Related terms

- https://launch-rec.com/glossary/payroll-funding
- https://launch-rec.com/glossary/invoice-factoring
- https://launch-rec.com/glossary/cash-conversion-cycle
- https://launch-rec.com/glossary/dso