Answers to 4 Common Payroll Factoring Questions
Written by moxysupport on September 1, 2015
If your small business is suddenly doing very well, you may discover that you are lacking the necessary cash flow to cover payroll due to timing issues. Many successful companies have this problem at one time or another. To get the money you need, a bank loan would be helpful, but the process can take a long time. When you need money right away, a loan will not work. Another route to go is payroll factoring. Perhaps you have heard about factoring, but are not quite sure what it is. Here are the answers to common questions:
How does Payroll Factoring Work Exactly?
Payroll factoring is quite a simple process. Your customers have purchased products from you and now you are waiting for them to pay their invoices. A factoring company will buy those invoices from you. And when your customers do pay, that money will go to the factoring company. This is basically a way for your business to get the money you need right away to take care of payroll expenses, without having to wait for payment from your customers.
What is the Difference Between a Payroll Factoring Company and a Bank?
In order to get a loan from a bank, generally you have to put up some form of collateral or show ample evidence that you will be able to pay it back. All of your finances, including credit, will be scrutinized. With a factoring company, you are not getting a loan. You are selling your accounts receivable directly to the company in exchange for cash. Your credit or ability to pay does not matter; as long as your customers are good for the money, you will not have anything to worry about. Plus, as mentioned, a factoring company, unlike a bank, will be able to give you cash almost immediately so you can pay your employees.
Does Every Invoice Need to be Factored?
One of the nice features of working with a reputable factoring company is the flexibility they will give you. It will be entirely up to you, which invoices you choose to factor. You can factor them all or just certain ones.
Why Use a Payroll Factoring Company?
If you need money for your business but do not need it right away, a bank may be a good option for you. However, if you do need quick cash, payroll factoring is the way to get it. In addition, even if your business is doing well, you may have a tough time getting a loan. In recent years, banks have been increasing their lending restrictions.
While you may be tempted to just wait for your customers to pay you, in the meantime your business could grind to a halt. When that money eventually does come in, you could find yourself in a financial hole from which it may be impossible to recover. To avoid this, think about payroll factoring services from US Funding. We can very quickly get you the money you need to pay employee salaries in order to keep your production going.