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Financing Options for Security Guard Companies

Most guard company financing questions come down to timing: payroll goes out weekly while clients pay in 30 to 60 days. A line of credit and invoice factoring are the usual answers, and the right one depends on your cost and your customers.

By Security Briefing, an independent publication. Details checked . Listings are not endorsements.

Illustrative payroll versus invoice timelineOver 45 days, the company pays guards on days 7, 14, 21, 28, 35, and 42, and is paid by the client on day 45. Day 0Day 45 PayPayPayPayPayPayClient pays
Illustrative only. Weekly payroll against a 45-day client payment term. Your terms will differ.

A worked example

All numbers are invented to show the arithmetic. They aren't typical rates.

Say you win a contract needing $10,000 of weekly payroll, and the client pays at 45 days. Six payrolls go out, totaling $60,000, before the first payment arrives. That gap is what you have to fund, and it grows if you win more work.

Wages are a legal obligation, whatever your client does. The Labor Department's Fair Labor Standards Act pages set out the federal wage and overtime rules.

Compare the options

General comparison. Terms vary by lender. Get them in writing.
OptionHow it worksFees to compareRepaymentRecourseEligibility looks at
Bank line of creditBorrow against a limit as neededInterest, annual and draw feesRepay and reuseUsually a personal guaranteeYour credit and financials
Invoice factoringSell invoices to a factor for an advanceDiscount fee, reserve, add-on feesClient pays the factorWith recourse, you may have to buy back unpaid invoicesYour clients' credit
SBA 7(a) loanSBA says 7(a) loans can fund short- and long-term working capitalInterest and SBA feesSet term, through a lenderSet by the lender and SBASBA and lender rules
Term loanLump sum, often for acquisitions or equipmentInterest, originationFixed paymentsOften a guaranteeYour credit and cash flow
Merchant cash advanceAdvance repaid from revenueFactor rate; compare the true cost carefullyFrequent withdrawalsRead the contractRevenue

Regulators describe the mechanics in the OCC's handbook on factoring, written for banks but useful for understanding the terms.

Questions before you sign

  • What's the total cost in dollars on my actual invoices, not just the rate?
  • Is factoring with or without recourse, and what triggers a buyback?
  • Is there a minimum volume or a long notice period to leave?
  • Will my clients be told, and how are they contacted?
  • Can I keep paying payroll taxes on time under this plan?

Before you borrow

Negotiate shorter client terms where you can, and invoice faster. Have a CPA or attorney review any agreement, since this page is general information, not financial advice.

Protect the payroll data you share with lenders: see how to safeguard digital payroll data. For the wider industry, see our guide to U.S. security companies.