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By Travis Yule — CEO & Founder, Full Send Funding
Staffing pays weekly and collects in six to twelve weeks. The capital that requires is a formula, not a rule of thumb — and it scales with every account you win.
A staffing agency pays its people every week and gets paid by its clients in six to twelve. That is not a collections failure or a bad contract — it is the structure of the business, and it produces what is arguably the worst cash conversion cycle in American commerce.
It also produces a specific, calculable number: the capital a staffing company must hold, permanently, simply to operate at its current size. Most owners have never calculated it, which is why the crisis in staffing almost always arrives during a good quarter.
Most businesses that wait to get paid can also wait to pay. A distributor takes thirty days from a supplier and gives thirty to a customer, and the two roughly cancel. A contractor stretches material suppliers while waiting on a draw.
Staffing has no such offset, because its cost of goods is payroll, and payroll does not have terms. Your temporary workers are paid Friday for last week regardless of whether your client has approved the timesheet, processed the invoice, or scheduled the payment run. There is no supplier to stretch. The single largest cost line in the business is due before any of the revenue arrives.
Four things come due on that same weekly cycle, and only the first is usually counted:
Together these are the employer burden, and they commonly add somewhere in the region of ten to fifteen percent on top of gross wages. Every calculation below uses twelve percent, which is a middle estimate — replace it with your own actual rate, because the whole point of the exercise is to use real numbers.
Working capital required to run a staffing desk is very close to:
Weekly payroll, including employer burden × the number of weeks between paying it and collecting for it
That is it. No percentage-of-revenue rule of thumb, no industry benchmark. Two numbers you already have.
Weekly payroll × 1.12 × weeks outstanding. Replace the 12% burden with your own actual rate — SUTA and workers’ compensation vary enough by state and classification to move this materially.
Read the bottom-right corner. An agency running $200,000 a week of payroll — call it $10 million a year of billings — with a twelve-week cycle needs roughly $2.7 million permanently deployed just to stand still. Not to grow. To continue.
And notice what the table does not depend on: profitability. A staffing company with excellent margins and a twelve-week cycle needs the same capital as one with thin margins and the same cycle. Profit determines whether you can build that capital over time. It does not reduce the requirement.
There is a counterintuitive corollary worth stating, because it explains why light-industrial and clerical agencies feel this more acutely than IT or executive search.
In a low-margin staffing business — say a 15% gross margin — eighty-five cents of every revenue dollar goes out as payroll and burden, and it goes out first. In a 35%-margin business, sixty-five cents does. Per dollar of revenue, the lower-margin agency has to fund substantially more, and it earns less on it.
So the businesses with the least cushion have the largest requirement. That is why the same growth that looks like success on a P&L can be the thing that ends a light-industrial agency, and why "we just need more volume" is frequently the wrong diagnosis.
Owners quote their terms as though terms were the cycle. Net 45 is a starting point. The lag that matters is pay-date to cash-date, and it accumulates in stages most agencies never measure separately:
Net 45 terms routinely become a sixty-five to seventy-five day cycle by the time all of that has run. Measure your own by pay date to deposit date, per client, over the last two quarters. Most agencies find at least one large client running two to three weeks longer than they believed — and since the formula is linear in weeks, three extra weeks on a $100,000 payroll is $336,000 of capital nobody planned for.
This is the part that catches good operators.
Landing a client that adds $50,000 a week of payroll is a straightforwardly good thing. It is also, on a nine-week cycle, an immediate demand for roughly $504,000 of new capital — deployed over the first several weeks, before the first invoice on that account is paid.
The agency does not have a revenue problem. It has, briefly and severely, a cash problem created entirely by winning. And because the requirement lands weeks before the offsetting cash does, the danger window is at its widest precisely when the business looks healthiest.
Two practical consequences:
One more variable decides what financing costs you: how much of your billings sit with your largest client.
An agency where one client is sixty percent of revenue is not really being underwritten on its own credit — it is being underwritten on that client's. That can be good news if the client is a Fortune 500 with a clean payment history, and it can be a hard decline if it is a single mid-market company on extended terms.
It also changes the failure mode, in a way underwriting reads directly from the bank statements. In a diversified book, a client paying late is a nuisance. In a concentrated one, a client paying late is a missed payroll, which is not a cash flow event — it is an existential one, because the workers do not come back.
The gap is a timing gap against a real, approved, collectible receivable. Several structures address it and they are not interchangeable.
Invoice factoring or payroll funding. Advances against billed, approved invoices — the most common structure in staffing because it scales automatically with payroll. Fit depends on assignability, concentration limits and whether the VMS permits assignment. Its shape matches the problem well: the advance grows exactly as the payroll grows.
An AR line or asset-based facility. Cheaper than factoring at scale, with a borrowing base against eligible receivables. Watch what "eligible" excludes — aged invoices, concentration above a cap, unbilled amounts, anything in dispute. The available line is frequently well below the receivable balance.
General working capital. A lump sum on revenue rather than on specific invoices. Simpler and faster, sensible for a defined event — onboarding a large account, covering a seasonal peak — and less suited to being the permanent structural funding of the cycle.
The trap: using a short-term, fast-amortizing product to fund a permanent requirement. The capital a staffing cycle needs does not go away next quarter; it grows with the business. Financing it with something that must be repaid in four months means refinancing repeatedly and paying an origination cost each time. Match the term of the money to the term of the need — and understand the true annualized cost of whatever you use, since with a fixed-fee product a fast repayment raises the effective rate rather than lowering it.
Full Send Funding funds staffing working capital between $5,000 and $10 million on terms from four months to three years, sized at 80% to 150% of monthly revenue, underwritten on bank activity rather than credit score. We file no UCC-1 lien against the business and our agreements contain no confession of judgment — which matters here more than in most industries, because a blanket lien sits directly across the receivables a factoring or AR facility would need.
In order of how much they move the number, and none of them cost anything:
Staffing pays weekly and collects in six to twelve weeks, with no supplier terms to offset it, so the capital required is simply weekly payroll including burden multiplied by the collection lag in weeks. At $100,000 of weekly payroll and a nine-week cycle that is about $1 million, permanently. It scales linearly with growth, which is why winning a large account is a cash emergency before it is a win, and it is worse at low margins because more of every revenue dollar leaves first. Terms do not set the cycle — timesheet approval, invoice consolidation, VMS settlement and client AP do — and measuring the real lag per client is the cheapest capital available.
If you want to size your own requirement against real numbers rather than a rule of thumb, call 518-312-0382 or check what you would qualify for. A minute, soft credit pull only, and no obligation.
Weekly payroll including employer burden, multiplied by the number of weeks between paying it and collecting for it. At $50,000 of weekly payroll, a 12% burden and a nine-week cycle, that is about $504,000 held permanently. Use your own burden rate rather than a rule of thumb — SUTA and workers’ compensation vary enough by state and classification to move the answer materially.
Because the capital requirement scales linearly with payroll and lands weeks before the offsetting cash. Winning a client that adds $50,000 a week of payroll is an immediate demand for roughly half a million dollars of new capital, deployed over the first several weeks, before that account pays a single invoice. The business does not have a revenue problem; it has a cash problem created entirely by succeeding.
Everything paid on top of gross wages on the same weekly cycle: the employer half of FICA, FUTA, SUTA, workers’ compensation premium, and benefits where offered. It commonly adds ten to fifteen percent to gross wages, and it is funded at the same time as the wages themselves — which is why calculations based on wages alone understate the requirement.
Pay date to deposit date, which is almost always longer than the stated terms. The lag accumulates through timesheet approval, invoice preparation and consolidation, client AP processing and payment runs, and — where a vendor management system sits in between — its own approval and remittance cycle, which may carry longer terms than the ones you negotiated with the end client. Net 45 routinely becomes sixty-five to seventy-five days.
They solve the same gap differently. Factoring or payroll funding advances against billed, approved invoices and scales automatically with payroll, which matches the shape of the problem well; fit depends on assignability, concentration limits and whether the VMS permits assignment. An AR line or asset-based facility is usually cheaper at scale but its borrowing base excludes aged, concentrated, unbilled or disputed amounts, so the available line is frequently well below the receivable balance. General working capital suits a defined event rather than the permanent structural need.
Substantially. An agency where one client is sixty percent of revenue is effectively being underwritten on that client’s credit rather than its own — which can be good news with a large, reliably paying client, and a hard decline otherwise. It also changes the failure mode: in a diversified book a late payment is a nuisance, and in a concentrated one it is a missed payroll, which is existential because the workers do not come back.
Measure the real cycle per client, pay date to deposit date. Then attack timesheet approval, which is the earliest stage and often the longest — automated capture with supervisor sign-off can remove a week outright, and because the formula is linear in weeks, a week removed is a direct reduction in capital required. Invoice the day the period closes, know your VMS terms specifically rather than the end client’s, and use your actual burden rate rather than a stale estimate.
Because more of every revenue dollar leaves first. In a 15% gross margin business, eighty-five cents of each dollar goes out as payroll and burden before any of it is collected; at a 35% margin, sixty-five cents does. The lower-margin agency funds more per dollar of revenue and earns less on it, which is why light-industrial and clerical agencies feel the cycle more acutely than IT or executive search.
Travis Yule founded Full Send Funding in 2021 and leads it from Middle Grove, New York. He writes about working capital from the underwriting side of the table — what the numbers actually have to say before a business gets funded.