How do I cover payroll at my collision shop while I wait on insurance checks?
The car left Tuesday. The carrier check shows up in a month. The techs are paid Friday. Here are the three tools for that gap, which one actually fits a collision shop, and what each costs.
The collision shop cash cycle, in one paragraph
The estimate is approved and parts and paint go on the supplier account the same day. The techs who fix the car are paid Friday. The customer pays a deductible at pickup, and the rest of the ticket — most of it — arrives from the carrier or the DRP weeks later, and later still if a supplement is filed. The money is not missing; it is in transit. But payroll does not accept a claim number, and neither does the paint supplier. Every collision shop carries that gap. The question is what carries it.
Three ways to carry the gap
| Working capital | Line of credit | Invoice factoring | |
|---|---|---|---|
| Fits this gap? | Yes — one lump sum sized on deposits | Yes — draw on payroll week, repay when checks clear | Usually not — insurer and DRP claims are generally not factorable |
| Amount | $10,000 – $2,000,000 | $25,000 – $500,000 | $10,000 – $5,000,000 facility |
| Speed | Offer in ~4 business hours, funded in 24 | 1–3 days to open; same-day draws after | 3–5 days to open; 24 hours per invoice |
| Minimum FICO | None | 600 | None (your customer is underwritten) |
| Time in business | 6 months | 12 months | 3 months |
| Minimum volume | $15,000/mo deposits | $25,000/mo deposits | $20,000 in open B2B invoices |
| Repayment | Fixed daily or weekly ACH; weekly can land on payroll day | Fixed schedule per draw; nothing owed while undrawn | Your customer pays the invoice; up to 90% advanced |
| Best for | Need it this week; under 12 months in business; score under 600 | A gap that repeats every month; shop has the history | Fleet, dealer sublet and warranty-administrator work on net terms |
Why working capital fits a collision shop better than it fits most trades
- Your real revenue counts. A lender that reads a card-processing feed sees deductibles. Liftbay Capital reads the bank statement, so carrier and DRP direct deposits are sized like any other deposit. Approvals generally land between 75% and 150% of one month’s deposits, and for a shop whose month is mostly insurer checks, that is the difference between a useful number and a useless one.
- The payment can land on payroll day. Pick weekly ACH and the debit comes out the morning you are already watching the account. No split of card sales, no holdback, no lockbox.
- It is sized for the lean stretch. The payment is set against your slowest month in the window, not the average, so a supplement that pushes one check out does not break the schedule.
- You can pay it down when the checks land. Pay off inside the first 30, 60 or 90 days and keep up to 30% of the remaining cost. A shop that takes an advance in a lean month and clears it when a batch of carrier checks arrives pays well under the headline.
What it costs
A representative $150,000 working capital advance over 12 months has a total payback of $190,500, a $40,500 cost of funding, at $756 per business day or $3,664 a week. An illustration, not an offer. A line of credit is charged only on the drawn balance for only as long as it is drawn; a draw to make two payrolls, repaid three weeks later when the checks clear, costs three weeks of that draw and nothing for the rest of the year. For a shop that meets the line’s floors and lives with this gap every month, that is the whole argument for opening one in a strong month and leaving it at zero until it is needed.
Where factoring does fit a body shop
If part of your book is fleet repair on net-30, sublet work billed to a dealer, or warranty-administrator claims on terms, those invoices can be factored: up to 90% advanced within 24 hours of invoice approval, with your customer’s credit underwritten rather than yours. A factoring facility on that work can run alongside a working capital advance or a line, because it is sized on your customers’ invoices rather than your deposits. The insurer side of the book stays with working capital or the line.
What you’ll need
- Your three most recent months of business bank statements, as PDFs from the bank — the account the carrier and DRP checks actually land in. Four months if your shop is seasonal.
- A rough figure for weekly payroll and the typical gap between delivery and the carrier check, so the term and payment day can be set to match.
- Disclosure of any open advance or loan. If you have one, see funding with an existing cash advance.
- For factoring: a list of fleet, dealer or warranty customers you invoice on terms and your current open invoices.
Floors: $15,000 a month in deposits and 6 months in business for working capital, with no minimum credit score. A complete file gets an offer in about four business hours and funds in 24, so a shop that applies Monday morning is usually making Friday payroll with the money in the account.
Related: Working capital · Line of credit · Collision & body shops · How much can a body shop borrow?
Questions that usually follow.
Can I factor insurance claim payments to cover payroll?
Generally not. Most insurer and DRP claim payments are not factorable, so the gap between the car leaving and the carrier check landing is covered with working capital or a line of credit, not factoring. Fleet, dealer sublet and warranty-administrator invoices on net terms are the factoring fit.
Do insurance and DRP checks count as revenue when I apply?
Yes. Liftbay Capital underwrites the business bank statement, so carrier and DRP payments that land in your operating account are deposits. A collision shop collecting most of its revenue from insurers is sized on its whole revenue, not just customer deductibles.
Can the payment land on the same day I run payroll?
Yes. Working capital repays by a fixed daily or weekly ACH, and most collision shops pick weekly so the debit comes out on the day the techs are paid and the account is being watched anyway. There is no split of your card sales and no holdback.
What if the supplement pushes the check out even further?
That is the normal shape of the business and it is why the payment is sized against your slowest month in the statement window, not the average. A supplement that delays one check does not change a fixed payment that was already sized for a lean stretch.
Should a collision shop use a line of credit instead?
If the gap repeats every month and you have 12 months in business, 600+ FICO and $25,000 a month in deposits, a line is the cheaper tool: draw to make payroll, repay when the checks clear, pay nothing while it sits unused. If you need it this week or do not meet those floors, working capital funds in 24 hours with no minimum FICO.
Done reading? Get a real number.
Four minutes and three bank statements. Offer in about four business hours, funded in 24.