Financing Deep Dive – The Staffing Services Industry

It has been said that small businesses are the backbone of the US economy. If that is true, then staffing firms play a critical role in the health of the patient. There are approximately 26,000 staffing and recruiting companies operating in the United States as of 2025. These companies collectively run around 54,000 offices nationwide. This figure includes agencies specializing in temporary, contract, and direct hire placements, with about 57% of these firms focused on the temporary and contract staffing sector. The US staffing services sector is expected to generate about $188 billion in revenue during 2025, after experiencing a ten percent revenue decline in 2024. The industry peaked in 2022 with about $219 billion in revenue. Approximately 85% of this revenue comes from temporary and contract worker placement. Staffing firms in the United States play a crucial role in providing workforce solutions across a broad spectrum of industries.

The U.S. staffing services industry is highly fragmented. Only a small fraction of the 26,000 firms are large players. In 2024, just 224 companies generated at least $100 million in staffing revenue, and these accounted for 68% of the entire market. This means that while a handful of large firms hold a significant market share, most agencies are small or mid-sized businesses, each holding a minor share of the overall market. Most staffing companies serve niche markets, specific industries, or local geographies, contributing to the industry’s diversity and competitive landscape.

Industry Reach

Staffing firms support virtually every sector of the U.S. economy, providing both high-skilled professionals (such as IT, healthcare, and engineering) and essential support in industrial, office, and service roles. This versatility makes staffing agencies a vital resource for businesses facing fluctuating demand, skill shortages, or specialized project needs.

Major Industries Supported

• Information Technology
  • Software development, network administration, cybersecurity, and data analysis.
• Healthcare and Medical
  • Nurses, physicians, medical assistants, allied health professionals, and administrative staff.
• Finance and Accounting
  • Accountants, auditors, financial analysts, and tax professionals.
• Manufacturing and Industrial
  • Skilled laborers, machine operators, warehouse personnel, and assembly line workers.
• Administrative and Office Support
  • Receptionists, administrative assistants, data entry clerks, and payroll specialists.
• Engineering
  • Mechanical, electrical, civil, and software engineers for both project-based and permanent roles.
• Retail
  • Sales associates, cashiers, stock clerks, and managers, especially during peak seasons.
• Hospitality and Tourism
  • Servers, bartenders, housekeepers, event staff, and hotel management.
• Construction
  • Carpenters, electricians, plumbers, project managers, and general laborers.
• Legal
  • Paralegals, legal assistants, attorneys, and compliance specialists.
• Marketing and Creative
  • Graphic designers, copywriters, digital marketers, content creators, and social media managers.
• Education
  • Teachers, administrators, support staff, and substitute educators.
• Transportation and Logistics
  • Truck drivers, delivery staff, logistics coordinators, and warehouse workers.
• Energy and Utilities
  • Oil, gas, renewable energy specialists, and utility workers.
• Life Sciences and Pharmaceuticals
  • Scientists, researchers, lab technicians, and medical researchers.
• Agriculture and Farming
  • Seasonal laborers, farm managers, and agricultural technicians.

Additional Sectors

• Customer Service and Call Centers
• Insurance
• Human Resources
• Media & Entertainment
• Government
• Nonprofit
• Real Estate
• Telecommunications
• Marine and Skilled Trades

Financing Within the Sector – Seven Reasons US Staffing Firms Use Factoring Services

Staffing agencies are a significant part of the foundation of workforce management in the US, bridging the gap between employers and talent across industries. Yet, the business model of staffing firms presents unique financial challenges, most notably, the need to pay employees weekly or biweekly while waiting 30, 60, or even 90 days for client payments. To navigate these cash flow hurdles, many US staffing firms turn to factoring services. Factoring involves selling accounts receivable (unpaid client invoices) to a third-party financier (the factor) at a discount, in exchange for immediate cash. Below, we explore the seven key reasons why factoring has become an essential financial strategy for staffing agencies.

1. Ensuring Timely Payroll

The most immediate and critical reason staffing firms use factoring is to guarantee timely payroll. Staffing companies must pay their employees on a regular schedule, regardless of when clients settle their invoices. Delays in payroll can lead to worker dissatisfaction, loss of talent, and even legal trouble. Factoring bridges the cash flow gap by converting unpaid invoices into working capital, ensuring that payroll obligations are met without fail. This reliability is central to employee retention and the agency’s reputation.

2. Stabilizing and Improving Cash Flow

Cash flow volatility is a persistent issue for staffing agencies, primarily due to extended client payment terms. Factoring provides immediate access to funds tied up in receivables, transforming an illiquid asset into cash that can be used for daily operations, investments, or unexpected expenses. This cash flow stability enables agencies to operate smoothly, make strategic decisions, and avoid the stress of waiting for client payments.

3. Supporting Rapid Growth and Expansion

Staffing firms often encounter sudden opportunities for growth, such as large contracts or seasonal surges in demand. However, scaling up requires significant upfront capital to recruit, onboard, and pay new workers before client payments come in. Factoring gives agencies the flexibility to take on new business without being constrained by cash flow limitations. By leveraging factoring, agencies can confidently say “yes” to large projects and expand their client base.

4. Minimizing Financial Risk and Credit Exposure

Staffing agencies frequently extend trade credit to clients, exposing themselves to the risk of late or non-payment. Factoring companies often perform credit checks on clients and, in some cases, offer non-recourse factoring, which shifts the risk of bad debt to the factor. This arrangement reduces the agency’s exposure to financial losses, allowing them to focus on growth rather than collections and credit risk management.

5. Flexible and Scalable Financing

Unlike traditional loans or lines of credit, factoring is highly flexible and scalable. Staffing agencies can choose which invoices to factor and when, tailoring the service to their cash flow needs. This flexibility is especially valuable for agencies with fluctuating business volumes, such as those serving industries with seasonal or project-based demand. As the agency grows and invoices increase, the available funding through factoring grows in parallel.

6. Streamlining Operations and Reducing Administrative Burden

Factoring companies do more than just provide funding; they also take over the management of accounts receivable, including invoice verification, collections, and credit checks. This outsourcing reduces the administrative workload on staffing agencies, freeing up resources to focus on core activities such as recruiting, client service, and business development. The result is improved operational efficiency and fewer distractions from cash flow management.

7. Access to Expertise and Value-Added Services

Many factoring companies provide additional services that go beyond simple funding. These may include credit analysis of prospective clients, receivables management, and detailed financial reporting. Such value-added services help staffing agencies make informed decisions, reduce risk, and optimize their financial performance. For newer or rapidly growing firms, this expertise can be invaluable in navigating complex client relationships and credit environments.

The Factoring Process: How It Works

To appreciate why factoring is so effective for staffing firms, it’s helpful to understand the process:

• Agreement: The staffing agency and factoring company sign a contract outlining terms and fees.
• Invoice Submission: The agency submits invoices for completed services to the factor.
• Verification: The factor verifies the invoices and checks the creditworthiness of the agency’s clients.
• Advance: The factor advances a percentage (typically 70–90%) of the invoice value to the agency, often within 24–48 hours.
• Collection: The factor manages collections, following up with clients for payment.
• Settlement: Once the client pays, the factor releases the remaining balance to the agency, minus fees.

This process is not a loan. It does not add debt to the agency’s balance sheet, nor does it require monthly repayments. Instead, it’s an “off-balance sheet” financing solution that improves liquidity without increasing liabilities.

Conclusion

Factoring services have become a cornerstone of financial management for US staffing firms. The unique challenges of the industry, tight payroll cycles, delayed client payments, and the need for rapid scaling, make traditional financing options less effective. Factoring addresses these challenges by ensuring payroll, stabilizing cash flow, supporting growth, reducing risk, offering flexibility, streamlining operations, and providing expert support.

While there is no official statistic on the exact percentage of staffing firms using factoring services, industry evidence indicates that a substantial portion, likely a significant minority or firms rely on factoring as a core cash flow management tool.

By leveraging factoring, staffing agencies can focus on what they do best: connecting talent with opportunity, growing their businesses, and delivering value to clients and employees alike.

Sources:

US Staffing Industry Forecast: March 2025 Update | Staffing Industry Analysts

Staffing Industry Statistics – American Staffing Association