Payroll Funding vs Bank Loans: Which One Is Right for Your Staffing Agency?

Lone Oak Payroll is a payroll funding and services company tailored for the staffing industry. We offer invoice factoring for staffing agencies, providing the necessary cashflow to help businesses accelerate their growth. If you own a staffing firm and are wondering what the benefits of payroll funding vs bank loans are, look no further. Here are six ways payroll funding can offer you greater flexibility and opportunities for growth compared to a traditional bank loan.

Benefits of Payroll Funding vs Bank Loans

1. More Cash Flow

Cash flow from Lone Oak Payroll operates more like a revolving line of credit than a classic bank loan. Because we advance funds on a client’s invoicing from week to week, we’re able to help our clients fund their biggest expense (payroll) while providing them maximum cash flow and flexibility to operate and grow their business.

2. Back Office Services

Unlike a bank, Lone Oak Payroll saves staffing agencies overhead by managing  back-office processing. We process payroll and invoicing, manage AR collections and cash applications, and process tax payments and filings on behalf of our clients – all of which cut down an agency’s need for back-office resources and associated costs.

3. Easier Access to Credit

A bank will require a business and its owners to undergo stringent credit and background checks. While Lone Oak Payroll does its own underwriting, we take more interest in the creditworthiness of a staffing agency’s customers, as the customers are the party responsible for paying the invoices. This is a particular benefit to start up agencies who may not have the credit history necessary to secure competitive loan rates for their business. Entrepreneurs also often have periods of time where resources and credit are stretched thin before the benefits of starting a business begin to be realized. In these scenarios, Lone Oak Payroll is often the perfect resource.

4. No Cash Accounts Necessary

Banks require businesses to keep cash accounts with them, restricting an agency’s ability to take advantage of competitive rates and services offered by other institutions. Lone Oak Payroll is not a bank, so clients are encouraged to find the best banking solutions for the unique needs of their business.

5. More Flexibility

Traditional bank loans aren’t flexible enough to keep up with rapid growth, and as such will govern or stifle a staffing agency’s growth. In contrast, there is no governor or limiting factors on the amount of cash flow Lone Oak Payroll can extend to its clients, allowing them to aggressively pursue growth opportunities (new contracts, more placements, new customers, etc.).

6. Higher Advance Rates

With advance rates as high as 97%, Lone Oak Payroll puts more cash in clients’ pockets with no required cash reserves. Traditional bank loans are typically structured with 50-80% advance rates and imposed cash reserves of up to 20%. Both of these options from a traditional bank can stifle a company’s growth and ability to effectively operate a business.

To learn more about payroll funding vs bank loans and Lone Oak Payroll’s services for staffing firms, please contact us. We’d love to hear from you!