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Payroll Factoring: What You Need to Know

Last Modified : May 09, 2024

Fact-checked by: Bruce Sayer

Have you ever thought, “Can I meet my next payroll?”

Making payroll can be difficult even for highly profitable businesses. Long payment terms on customer contracts or starting a large, new project can mean you have to scale up and recruit fast. In either case, cash flow can quickly become tight.

Payroll cannot be skipped or delayed. Business owners must pay their workers every week or every other week. Unfortunately, customers don’t always pay on time and even if they do, there is still a wait time of a month or two for the payment, depending on the agreed-to terms.

Simply doing the math, if you do payroll weekly and offer your customers 30-day payment terms, you have to keep enough money to cover four to five payrolls before you can get paid for the placements you recruited.

How Payroll Factoring Works

Payroll is one of the biggest responsibilities of owning a business. As a recruitment agency, you are obligated to pay workers while waiting on your invoices to be paid by your clients, all while managing the day-to-day running of back-office administration. With Payroll Funding you release the cash tied up in unpaid invoices by receiving a cash advance from your funder. The process is simple:

Step 1:  You invoice your customers and send us a copy.
Step 2:  We pay up to 92% of the value of your invoice.
Step 3:  We collect payment.
Step 4:  We pay you any remaining balances minus any agreed fees.

Invoice factoring for payroll allows your business to finance invoices and assets so you can make payroll for your employees. Simply put, you get the money to ensure you make payroll, have more time to recruit talent, and get the capital to invest in assets for growth.

When Should You Consider Payroll Factoring?

  • You are a staffing agency and want to ensure you have enough funds for payroll.
  • You want to reduce costs by outsourcing timesheet management.
  • You issue your clients credit terms of up to 90 days.
  • You want to employ workers/contractors throughout the US and Canada but don’t want to deal with the complexities of local state and province employment laws.

What Can You Accomplish with Recruitment Finance?

  • You can protect your business’ savings by using invoice factoring for payroll instead of using your savings for working capital.
  • You can avoid more debt by releasing cash tied up in unpaid invoices.
  • You can recruit and retain skilled and talented staff.
  • You can avoid lawsuits and penalties by having compliance and tax support.
  • You’ll have more time to focus on recruiting and growing your business.

What is Non-Recourse Payroll Factoring?

Another option to consider when shopping for invoice factoring is non-recourse factoring. Unlike traditional factoring, in non-recourse factoring, the factor assumes the risk of non-payment by the original debtor. If the debtor doesn’t pay the invoice, the business is not required to repay the factor. This method allows businesses to obtain immediate liquidity without the liability of potential non-payment by their customers. Not all companies that offer non-recourse factoring cover the same liabilities. You can find some things to look out for in our blog Top 8 Things to Understand Before Signing A Non-Recourse Factoring Agreement.


ABOUT eCapital

Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.

We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.

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eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit

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