Within the staffing industry, you may hear the terms payroll funding and invoice factoring being used interchangeably. This is because they refer to the same process. But while we can apply the term invoice factoring to any industry, the term payroll funding is most commonly used in the staffing world.
What is Invoice Factoring?
Lone Oak Payroll knows invoice factoring well. It’s what we do and how we help startup staffing agencies grow into nationally recognized businesses.
Invoice Factoring is when a business sells its accounts receivable to a factoring company. The factoring company advances up to 97% of the invoice value up front, providing your business with enough immediate cash to pay your employees and other operational costs. When the factoring company receives payment for the invoice, it sends you the remaining 3% (minus a factoring fee).
Because it provides immediate access to cash without the hassle of a bank loan, invoice factoring is useful if your small business regularly sells goods and services to clients who typically take 30-90 days to pay an invoice.
What is Payroll Funding?
Payroll funding is the staffing industry term for invoice factoring, and it is one of the main services that Lone Oak Payroll offers to clients. We service staffing firms of all sizes, but we’re known especially for helping staffing agencies grow into nationally recognized businesses.
Want more specifics on what it’s like to partner with Lone Oak Payroll? We can summarize our payroll funding process in four steps:
- Your staffing firm generates a $1,000 invoice that your customer agrees to pay in 30-90 days.
- Lone Oak Payroll buys your invoice and advances your firm up to 97% of the invoice ($970).
- Your customer pays Lone Oak Payroll the cost of the invoice ($1,000).
- Lone Oak Payroll deposits the remaining $30 invoice cost into your account (minus our small factoring fee).
This process gives you the cash you need to pay your hard-working employees and run your business. For a more visual representation of payroll funding and invoice factoring, check out our article What is Payroll Funding? Payroll Funding in 7 Simple Steps.