What does this guide cover?

A staffing agency at a 21.6 per cent gross margin can be profitable at 30-day terms and unprofitable at 75, on exactly the same placements.

Which funding products does this apply to?

Business Line of Credit, Invoice Financing, Payroll Financing. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.

Is this specific to staffing?

It is written around how a staffing business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.

The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.

How do I know a figure here is right?

Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.

Are the examples real deals?

No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.

Why do you never say what a typical rate is?

Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.

Is this financial or legal advice?

No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.

Can I reuse this content?

Quote a paragraph with a link back. Do not republish whole articles.

Does your bill rate cover the cost of funding payroll?

The spread between what you bill and what you pay is the whole business. Financing cost is subtracted from that spread, and it scales with how long your clients take to pay. Most agencies know their gross margin percentage and very few know what it is after funding at the terms their largest client actually pays on.

Illustrative only —bill 32.00 an hour, pay 22.00, burden at 14 per cent for employer taxes, workers compensation and unemployment. Your cost is 25.08. Gross margin is 6.92 an hour, or 21.6 per cent of the bill rate.

Now fund it. Suppose a facility priced at 2.2 per cent per 30 days on the invoice face, with the fee applied per period.

Client pays in 30 days: fee 2.20 per cent, 0.70 an hour. Margin after funding 6.22, which is 19.4 per cent of bill.
Client pays in 60 days: fee 4.40 per cent, 1.41 an hour. Margin after funding 5.51, which is 17.2 per cent of bill.
Client pays in 75 days: fee 5.50 per cent, 1.76 an hour. Margin after funding 5.16, which is 16.1 per cent of bill.

Then subtract what it costs to run the agency. Suppose recruiter compensation, back office, insurance and overhead come to 4.10 an hour billed.

At 30 days: 2.12 an hour of profit.
At 60 days: 1.41 an hour.
At 75 days: 1.06 an hour.

At 1,400 billed hours a week that is 2,470 a week at 45-day terms, 1,977 at 60 days and 1,484 at 75. The placements are identical. Half your profit is a function of your clients' accounts payable calendar.

What the arithmetic tells you to do

Price the terms, not just the role.A client demanding 75-day terms is asking for 1.06 an hour of your margin. Quote them accordingly: on the numbers above, restoring the 30-day profit at 75-day terms takes a bill rate of about 33.10 rather than 32.00. That is a 3.4 per cent price difference and it is a much easier conversation than it sounds, because you can show the arithmetic.

Know which clients are actually profitable.Run the calculation per client using their real average days to pay, not their stated terms. Most agencies find one or two accounts that look like their best customers by volume and are close to break-even after funding. That is not a reason to resign them, but it is a reason to renegotiate at renewal.

Watch the fee period mechanics.Whether 62 days is billed as two periods or as three depends on whether partial periods round up. On a 2.2 per cent structure, a rounding rule can cost you a full 0.70 an hour on the slowest-paying clients. Ask for the rounding rule in writing before you sign.

The four other costs in the same line

Funding cost is the one people compute. These are the ones that move the answer.

Dilution.Credit memos, hours disputed after the fact, rate corrections and billing errors reduce collections below the invoice face. A facility measures this as dilution and a rate above the facility's threshold triggers a lower advance rate or a reserve. It also comes directly off your margin, and unlike the funding fee, it is entirely within your control.

Reserves you do not get back quickly.At a 90 per cent advance, 10 per cent of every invoice sits with the funder until collection. That reserve is not a cost, but at 75-day terms it is a permanent balance of roughly two and a half weeks of billings that you will never touch while the facility is open.

Concentration limits.If one client exceeds the facility's concentration cap, the excess becomes ineligible and you fund that portion of payroll yourself. The threshold and how it interacts with slow payment is covered in client concentration limits in a staffing facility.

Payroll taxes.The withheld employee taxes in every payroll are trust fund money. Using them for anything else exposes the responsible individuals personally under 26 U.S.C. 6672. An agency whose funding gap tempts it to be late on a deposit has a problem that is categorically different from a cash-flow problem.

The break-even you should know by heart

For any placement, the funding cost per hour is the bill rate multiplied by the periodic fee multiplied by the number of periods. Profit per hour is:

bill rate, minus pay rate times one plus burden, minus funding cost, minus overhead per hour.

Set that to zero and solve for the bill rate. On the numbers above, at 60-day terms with a 22.00 pay rate, the break-even bill rate is about 30.50. Anything you quote below that loses money on every hour worked, no matter how many hours there are.

Put that formula in a spreadsheet and give it to whoever quotes your rates. The commonest way an agency gets into trouble is not a bad client; it is a good salesperson winning volume at a rate nobody recomputed after terms slipped.

When the spread will not carry a facility

Some books of business cannot support invoice finance at all. Light industrial at a 14 per cent gross margin with 60-day payers and 6 per cent dilution is one of them: the facility takes more than a third of the spread and dilution takes another slice, and there is nothing left for the recruiters. In that case the options are:

Raise rates, which is the only structural fix
Shorten terms, including offering a discount for payment in 15 days, which is often cheaper than the facility
Reduce burden by improving the workers compensation experience rating, which is slow but permanent
Move the mix toward higher-margin placements, which is a sales strategy rather than a financing one
Accept that the agency can only grow at the rate its own retained profit allows

None of those is a financing product. That is the point. A facility converts a timing problem into cash; it cannot convert a margin problem into anything.

What to have ready before you renegotiate

A client-by-client ageing with actual average days to pay over twelve months. Your dilution rate, computed as credits divided by gross billings. Your true burden rate from the payroll provider, not an estimate. Your overhead per billed hour. And a rate card that shows what each terms bracket costs, so that when a prospect asks for 75 days you have a number rather than a pause.

Refuse to quote a new client's rate before you know their payment terms, and refuse to accept terms in a master services agreement that differ from the terms your rate assumed. The margin you are protecting is roughly one dollar an hour, and it disappears in a clause.