One of the problems that most service-based businesses encounter is how to fulfill their weekly payroll needs, primarily when they operate in a way that customers get a week or two to settle payments. It’s also true for staffing companies that have to wait for a specific period before payments from clients arrive. This is where payroll funding gets into the scene and becomes of great help. It gives a chance for a startup business or a temporary staffing company to obtain immediate cash that they can use to pay their employees by selling their invoices.
All a startup business or a staffing company has to do is to submit the invoices. These should come together with copies of the employees’ time cards detailing the set payment due dates. After an account for financing gets successfully set up and the payroll funding provider receives the invoices, it will deposit the much-needed funds, which can reach up to 90% of the invoices, to the startup business’s or staffing company’s bank account. It will help them cover the payroll for the week until the client payments arrive.
As you probably already know, startup businesses and staffing agencies depend largely on steady cash flow, so even a seven-day wait for customer payment can affect their operation and their ability to fulfill payroll responsibilities. More often than not, they end up being short on cash, which, of course, will lead to several problems if not solved.
Below are the benefits of payroll funding as an alternative way to finance your small business or staffing agency:
1. It’s Flexible Enough to Meet Your Financing Needs Better
Flexibility is what attracts business owners to payroll funding. It’s something that startups and staffing agencies will have a hard time finding in a bank or other financing institutions, mainly because dramatic increase or decrease is common in their working capital. Payroll funding eliminates the worry of not having enough money to settle salaries for employees since it can get structured based on your current volume and needs.
Payroll funding even comes with three common rate structures. While tiered rate structures are the most popular, you can also opt for the daily rate and net funds employed options. Since each of these comes with advantages and disadvantages, you can choose one that best fits your financing needs.
2. It’s Easy to Obtain
Are you tired of the complicated and lengthy process of applying for a loan from a bank? If you are and you don’t want to get stuck with your payroll responsibilities because of a lack of funds, it’s time to consider payroll funding as an alternative way to solve your problems. While banks and other financing institutions have a lot of requirements, having creditworthy clients is enough with factoring services.
3. Helps You Achieve Consistent Cash Flow
When you’re going to give a client a time allowance to complete payments, you won’t know when the money will arrive. It makes you worry about the payroll that you have to meet for the week. It’s also where timing your invoices becomes so essential since it increases the chance of getting paid earlier. Luckily for you, you can be more confident that you can fulfill your responsibilities without thinking so much about when to receive payments from your clients since payroll funding will ensure consistent cash flow for your business. Again, this will give you enough funds until the client payments arrive.
4. Most Payroll Funding Gets Released Within 24 Hours
Most of the time, funds get wired to your bank account within the same day you applied for payroll funding. It holds as long as all documentation, including the electrically generated invoice copy, gets submitted in the morning before noon. Of course, you also have to make sure that you establish your account for financing beforehand. Nonetheless, same-day funding isn’t bad, right?
5. Payroll Funding Eliminates the Need to Add to Your Credit Card Debt
As already mentioned above, consistent cash flow is critical for startups and staffing agencies to continue operating. The problem is that delayed client payments are something you can’t avoid as a service-based business, and it’s the reason why most owners like you choose to supplement the needed capital using personal cash or credit cards. While it can be another way to solve the financing issues of your company, it often leads to too much stress. What happens if your client pays late? You’ll end up paying the interest on your credit debt, which can be costly.
If you want to eliminate the need to add to your credit card debt and the stress that comes with it, utilize payroll funding instead.
6. You Can Offer Competitive Terms to Your Clients
One to two months is the timeframe preferred by commercial clients when it comes to settling payments for services received. For a startup business like yours, however, such a norm can be hard to accept, especially when you have weekly payroll responsibilities to your employees. Of course, this means refusing to offer your services to some potential clients and losing profits.
Payroll funding can be the right solution for this dilemma. The truth is that there’s no need for you to lose some clients only because you can’t offer them competitive terms. Since factoring providers can take care of your payroll requirements, you can close more deals from your pipeline.
Final Thoughts
Aside from the benefits mentioned above, payroll funding also drives growth for your business by giving you the needed working capital to take on more new projects. Also, it allows you to recruit and retain the most skillful and talented employees of your company. As you know, timely salary payments are vital in keeping them satisfied and happy, encouraging them to stay in your business or agency longer.
