Nurse Staffing Agencies – Payroll Funding

Payroll funding is one of the most common reasons that nurse staffing agencies (and other staffing agencies) use invoice factoring. By factoring one or more invoices, the agency can unlock the money needed to cover payroll and associated expenses in 24-48 hours without incurring debt.

Payroll Funding Options for Nurse Temp Agencies

• Self-funding payroll

Ideally, your staffing business would be able to produce adequate cash flow to meet payroll expenses from day one. However, that may not always be the case, since recruiting, hiring, onboarding, and 1-2 payroll cycles often occur before corresponding client payments come in, which creates a lag between the time when expenses (payroll, payroll taxes, employee benefits, and payroll prep expenses) need to be paid and customer payments for these same services have been made.

Other forms of self-funding payroll include owners chipping in more money from reserves, investments, personal credit cards, or even their personal funds. For some nurse staffing agencies, tapping current or new investors for more capital may also be an option.

• Debt-financing for payroll

Nurse temp and staffing companies can also choose to take on debt to meet payroll expenses. Financing of this sort can come from a business line of credit or bank loan, or credit cards issued to the staffing business. Personal or private loans from the business’ owners or investors also fall under this category.

All debt incurs risk since generally some form of collateral is attached to any type of business debt. Additional considerations include the terms of repayment, since repaying the loan will further strain cash flow in the future with new or increased monthly payments. The interest rate at which the loan is granted also factors in, since, unless the debt is repaid within one payment cycle, interest rates will drive up the cost of debt financing as a form of payroll funding.

• Invoice factoring for payroll funding and staffing agency financing

Invoice factoring is often the go-to payroll financing option for staffing and temp agencies, including nurse staffing businesses. It’s a debt-free financing tool businesses can use to unlock the money represented in its unpaid customer receivables to fund payroll, meet other expenses, or even invest in growth initiatives.

When factoring invoices, a nurse staffing agency decides to factor (or sell) one or more of its unpaid client invoices to an invoice factoring company, like Wave Crest Capital. When the invoice is factored, we send the staffing agency anywhere from 90-98% of the face value of the invoice amount right away – usually they’ll have it on the next business day.

For this service, we earn a small fee (called a factoring fee) which is usually from 1-5% of the invoice amount. Any amount held in reserve is then returned to the staffing agency after their client has remitted payment for the invoice in full.

Instead of chasing customer payments, the staffing agency has the money it needs to meet payroll expenses and focus on running and growing its operation. It’s also sustainable, compared to taking on debt for payroll funding or meeting operational expenses since staffing agencies can choose to factor invoices any time it serves their business purposes. No debt, no collections, no losing face with investors – and adequate working capital for payroll funding.

Why Use Invoice Factoring for Nurse Staffing Payroll Financing

For nurse temp agencies, as with other temp and staffing businesses, one of the biggest expenses they have is for payroll. Especially when a temp agency is growing. This is something to new nurse staffing agencies need to plan for, especially, as it is common for payroll expenses to outstrip cash flow in early stages or when there is high demand for temporary workers.

While you might think that high demand = high revenue and cash flow, you’re right, but as we mentioned, there is a lag between when expenses are due and income is received.  A nurse staffing business in early stages will even be investing in recruiting before they have customer contracts in hand to produce the revenue needed to cover these expenses. Examples of payroll-related expenses that can be more easily met by factoring invoices include:

• Advertising for recruiting

• Advertising and marketing to attract clients

• Hiring costs, such as paying your staff to recruit and interview candidates and costs for substance and background screening

• Sign-on bonuses, which are commonly needed to attract nurses since they are in high demand compared to supply

• Salaries and paychecks (for nurses working for your staffing business as well as your own employees)

• Payroll taxes

• Employee and worker benefits

Your nurse staffing business may incur all of these expenses and even have to cover salaries and paychecks for 1-2 payroll cycles before a client payment has caught up with these expenses. So it’s easy to see how invoice factoring can bridge this gap, and why nurse staffing agencies would find it one of the best options for funding payroll.

Get a free quote for nurse staffing agency payroll funding or invoice factoring:

We would be happy to provide you with a risk-free, obligation-free quote for invoice factoring so you can determine whether it’s a good option for your staffing business. Call us at 949-415-6427 or apply online today to get answers in 24-48 hours. You could go from approval to your first funding in 24-48 hours, or even faster.