Security Guard Factoring: Make Payroll While Clients Pay in 30 to 60 Days

A guard company’s biggest cost is its people, and it pays them before it gets paid. Guards work the post, payroll goes out on Friday, and the invoice for those hours sits in a client’s accounts payable queue for a month or two. Every new site you take on makes the gap bigger, because the payroll starts on day one and the first payment arrives weeks later.

Security guard factoring closes that gap. You invoice your client for hours your guards have already worked, sell the invoice to a factoring company, and receive most of its value the same day. Your client pays the factor on its usual terms, and the factor sends you the rest, minus its fee.

Where the Cash Gap Comes From

What Qualifies

Factoring works on invoices for posts your guards have already worked, billed to a business or a government agency.

• Property and facilities clients. Commercial property managers, office parks, warehouses, plants, retail centers, HOAs and residential property managers that hire you under a services agreement.
• Events. Event companies, venues and promoters that contract you for staffing an event, once the event is worked and invoiced.
• Government agencies. Government invoices can qualify. Assigning payment on a government contract takes extra paperwork, so raise it when you apply. Our article on financing government contracts covers the basics.

What doesn’t qualify: services billed to individual consumers, and invoices for posts that haven’t been worked yet. The approval question is about your client. Will this business or agency pay this invoice? We review your company too, without a hard credit pull, and we don’t pull owners’ personal credit reports or scores.

Proof of Hours

You need your client’s approval of the hours you bill. That can be an approved timesheet, a post log the client signs off on, or an email or portal confirmation of the hours. A signed timesheet isn’t required. The cleaner your approval process, the faster we verify and fund each invoice.

A Worked Example: A New Site Contract

Here’s a guard company that takes on a new office park. The figures are hypothetical, not an offer, and use our estimator’s figures for professional services.

Twelve guards work 40 hours a week. The company bills $28 an hour and pays guards $18 an hour, invoices every two weeks, and the property manager pays on Net 45.

Without funding, this company would run three payrolls on the new contract, $51,840 in wages, before the client’s first payment arrived. With funding, each invoice pays for the payroll on the hours it bills, and the gap stays the same size as the contract grows.

Compare the fee with your margin. Each two-week invoice carries $9,600 above guard wages, before payroll taxes, insurance, uniforms and licensing. Funding it at 45 days costs $988.

Starting Out or Adding a Site

New guard companies can sign before they bill a single hour. $0 in sales is fine at signing. We generally look for invoice volume to reach at least $50,000 a month as the company grows. That’s a growth expectation, not a condition of signing and not a fee commitment.

A large new contract is where factoring helps most. If you’re bidding on a site that would double your guard count, get a proposal before you sign the client contract, so you know the payroll is covered from the first week.

What It Costs

Your agreement sets a fee schedule by payment period. The fee is calculated on the full invoice amount, and the longer a client takes to pay, the higher the fee on that invoice. It comes out of the reserve when the client pays, so you don’t pay anything up front. There are no setup fees, wire fees or monthly minimums.

In the example above, a $26,880 invoice paid on day 45 costs $988. Our guide to invoice factoring costs shows how the fee changes at 30, 45 and 60 days and how to compare quotes from different factors.

From a Sigma Client: Team 13 Security Services

Team 13 Security Services is a private security company. It guards residential and commercial properties, staffs special events and works for government clients. When it came to Sigma, it had been operating for five years and had more than 50 guards.

The problem. Team 13 had steady clients, but they paid on long terms, and the company paid its guards every two weeks. That gap made it hard to meet payroll on time.

What it factored. Team 13 factored $50,000 of outstanding invoices. It received a $40,000 advance right away. The fee was $1,450. When the clients paid, the $10,000 reserve came back minus the fee: $8,550.

The result. Team 13 met its payroll on time and kept its cash flow steady. Sigma handled collections on the factored invoices, which cut its paperwork, and the company could focus on serving its clients.

How to Compare Security Factoring Companies

If you already factor with another company, we pay off your current factor directly through a buyout. Our guide to switching factoring companies explains how that works.

What to Have Ready

• Your client list, contracts or service agreements, and each client’s payment terms
• A sample invoice and how each client approves hours
• An accounts receivable aging report, if you’re already billing
• Business formation documents and a voided check
• Your current factoring agreement, if you’re switching

Within 48 hours, you get a proposal with your advance, fee schedule and terms, and you don’t have to sign it. See how factoring works at Sigma, or read more about factoring for service businesses and payroll funding.

Questions About Security Guard Factoring

Will my clients know I factor my invoices?

Yes. A Notice of Assignment asks each client to send payment to Sigma. It’s routine for property managers and corporate accounts payable teams, and your guards, posts and client relationships don’t change.

Can I factor only some clients?

Yes. You choose which clients’ invoices to submit. Many guard companies fund their slow-paying clients and leave quick payers out.

What if a client disputes hours?

We work with you to resolve it. We handle a dispute about the service itself case by case, and credit insurance doesn’t cover disputed work. Getting hours approved before you invoice prevents most disputes.

Do you fund event security?

Yes, once the event has been worked and invoiced to a business client, such as the venue, promoter or event company. Invoices for events that haven’t happened yet don’t qualify.

Is security guard factoring a loan?

No. You’re selling invoices for work your guards have already done, so there’s no loan balance or repayment schedule. Funding grows with your billing instead of being capped at a credit limit.