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What the money is really costing you
Price factoring against a bank line on the same drawn balance — cash released, fees per month, and the effective annual rate.
The short answer
Factoring costs a discount fee charged per 30 days on the cash advanced, plus a service fee on invoice value. Convert both into an effective annual rate on the cash you actually receive, then compare it with a bank line on the same balance. Availability, not rate, usually decides which one you can have.
Factoring vs a bank line
What is funding your payroll gap actually costing?
A bank line is almost always cheaper on paper. The question is whether you can get one: banks lend against balance sheet and trading history, factors lend against the quality of your client's receivable. Most agencies under three years old only have the second option — and the cost of not placing is higher than either.
Next step
Funding cost is one input. Investor readiness is the other.
Score your traction, retention, model, team and materials in two minutes, and we will tell you exactly what to fix before an introduction.
Questions founders ask
How much does invoice factoring cost a staffing agency?
Factoring is usually priced as a discount fee charged per 30 days on the advanced amount, plus a service or admin fee on invoice value. The all-in cost depends on your advance rate, your clients' payment terms and how long invoices stay outstanding — which is why the effective annual rate matters more than the headline percentage.
Is factoring cheaper than a bank line of credit?
On rate alone, a bank line is almost always cheaper. The difference is availability: banks underwrite your balance sheet and trading history, while factors underwrite your client's receivable. Most staffing agencies under three years old qualify for the second and not the first.
What advance rate should a staffing agency expect?
Advance rates depend on client credit quality, invoice disputes and how clean your timekeeping and back-office records are. Agencies with strong corporate debtors and tight documentation obtain better advance rates and lower fees than agencies with concentrated or slow-paying clients.
What is the difference between factoring and payroll funding?
Factoring buys your invoices and advances cash against them. Payroll funding packages that advance with back-office services — payroll processing, tax filing, sometimes invoicing and collections. Payroll funding costs more in fees but removes headcount and compliance risk in the early years.
Stay close to the money
The recruitment funding briefing
One email a month: funding terms we are seeing, margin benchmarks, and what buyers are paying for agencies. Written for founders, not for a mailing list.
Better terms come from a better introduction
Founders we match get in front of funders who already understand staffing receivables — and operators who have negotiated these facilities before.