Is Payroll Factoring What’s Needed for Your Business?
Written by US Funding on December 7, 2015
Your temporary staffing agency or successful small business juggles many financial responsibilities including office supplies and equipment, sales and marketing materials, insurance, and much more. But, most likely, the largest financial challenge you have is meeting your payroll. This is where payroll factoring can solve a lot of problems for you.
What is Payroll Factoring?
Simply put, payroll factoring is an agreement between your agency or business and a trusted payroll factoring company, such as US Funding, where you sell selected unpaid invoices at a discount in exchange for immediately available funds to pay your employees the salaries they have earned. Here is how it works:
- You identify those unpaid – but not criminally overdue – invoices for which you are willing to relinquish responsibility.
- US Funding, your payroll factoring lender, accepts ownership of the bundle of invoices and gives you a lump sum that equals as much as 90 percent of the total amount.
- You receive cash from the transaction, sometimes as early as 24 hours later, to make payroll, or meet any other financial obligations you may have.
- US Funding proceeds to collect payment on the receivables represented by the purchased invoices.
- After all money owed is collected, you receive the remaining amount, minus a fee that you and US Funding agreed to at the beginning.
Example: You decide to use payroll factoring as a means to provide much needed cash and contact US Funding to apply for funds. You identify invoices that collectively total $100,000, show proof that the product was delivered or the service was performed to the customer’s satisfaction, and US Funding pays you $90,000 up front for your immediate use. US Funding is then responsible for collecting payment from the identified customers as they pay their invoices in 30, 60 or 90 days. Then, US Funding sends you the remaining $10,000, minus our mutually agreed upon fee for handling the transactions. It’s just that simple and easy to use payroll factoring to take the headache out of payroll responsibilities.
It’s much better than a bank loan. There is no complicated application process that requires divulging all of your company’s financial information. You do not have to provide collateral or create debt that shows on your balance sheet. There is no extended waiting period to find out if you’ve been approved. And, you don’t have to pay monthly interest.
You get cash when you need it, which equips your agency or company to meet obligations, expand business, hire more staff, or whatever you need to continue your success. You incur no new debt because payroll factoring isn’t a loan; it’s just a way to access the money that you have already earned. You choose which invoices you want to include and you are under no obligation to do it again. There is no application fee and no monthly minimum. Payroll factoring frees you from stress and you can focus your energy on the business that you love.
Of course, we are using payroll as an example of a major use for the funds you receive, but factoring does not require you to use the funds for a specific type of payment. Once you have the funds, you determine the most appropriate use for them.