Turned Down for a Business Payroll Loan?
Today, over 95% of business owners state that employee expenses are hurting their bottom line with the tight labor market. Businesses struggling to meet payroll risk the chance of losing their business. Worse, failure to comply with employment laws opens your business up for lawsuits.
Paying your employees on time is necessary to keep them happy and avoid legal and tax problems. Payroll financing can solve labor and cash flow issues.
Bankers Factoring provides entrepreneurs, startups, and businesses payroll funding through non-recourse accounts receivable (A/R) factoring. Also called invoice factoring, it is a way for companies to obtain quick cash for payroll.
Small businesses with cash flow issues from slow-paying customers will benefit from invoice factoring for payroll funding.
What is payroll funding?
Also called payroll factoring or staffing factoring, it is when a client sells their open invoices to Bankers Factoring. By selling your accounts receivable, we will deposit a cash advance up to 92% of the total A/R value. Within moments the uncertainty and anxiety for covering payroll vanish.
Once your customer pays the total amount of the invoice, the remaining 10% is then paid back to you, less our factoring fee. Much like the initial advance, these funds are often released shortly after payment is posted and funds have cleared.
Payroll funding works by providing working capital to pay employees or temporary staff before your customer pays. It gives companies the ability to meet payroll requirements every week.
How does payroll funding work?
Payroll factoring is a straightforward process. To get started your business needs unpaid invoices or receivables from a business-to-business (B2B) or business-to-government (B2G) entity. These commercial clients typically have extended payment terms causing gaps in cash flow.
The factoring process follows a standard pattern, and with an accurate and complete application, we can provide funding this week.
Steps in the payroll funding process:
- The client delivers and completes work to its customer (account debtor) and generates an invoice for future payment
- The client sells Bankers Factoring its unpaid or open invoices (A/Rs)
- Bankers Factoring provides up to 92% cash advance the same day as approval
- Upon payment from your client, the account debtor, Bankers Factoring issues you the factoring rebate (the remaining invoice balance), less our factoring fees.
Benefits and Advantages of Payroll Funding
Payroll funding is a great tool to retain employees as missing payroll is a surefire way to lose employees. Companies in various stages can benefit from factoring. For instance, if you are a startup staffing agency whose only account has net 30 or 60-day terms, you can benefit from the instant cash flow.
- Consistent cash flow
We remove the stress and worry of meeting regular payroll. As your business grows, we increase your access to capital.
- Same-day payroll funding
After we approve your application, you receive funding the same day
- We take on the credit risk
Our non-recourse factoring services cover you from any non-payment.
- Business growth driver
With the additional funding from invoice factoring, your business can take on new sales orders and customers.
- Easy to obtain
Payroll funding, through factoring invoices, is easy to get. We do not look at your credit, rather your customer’s creditworthiness
- A/R Management
We provide complete back-office support for the receivables process, removing the burden from your business. Our 24/7 online reporting portal provides up-to-date data.
- No balance sheet debt
Bank loans add debt to your balance sheet and appear as a liability. Selling accounts receivable is debt-free financing.
- Ability to offer extended payment
Commercial clients pay in 30,60, or 90-days. As a business with limited reserves, you can take on new and larger clients with extended payment terms.
As your sales grow, so does your line of funding with Bankers Factoring. As long as you add creditworthy clients to your business, your cash flow remains steady.
Who can benefit from payroll factoring?
Businesses with a lack of capital unable to meet current bills, with invoices to commercial clients, and accurate records will see business improvement from invoice factoring. Virtually any industry can take on payroll funding that meets funding requirements.
We funding payroll in the following industries:
Be wary of merchant cash advances (MCA) as an alternative form of financing. MCA’s can be expensive, with 150-700% APR, damaging an owner’s creditworthiness.
Payroll Finance Qualifications
Qualifying for payroll financing is more accessible than traditional bank loans and lending. Our A/R factoring services provide a payroll solution for small businesses, rapidly growing companies, and financially distressed firms. The process to qualify is rather simple:
- Creditworthy commercial or government clients.
- No liens against accounts receivable
- Good invoicing practices
Most financing plans can be funded in a week or less. To ensure your application gets approved, visit our previous article, 8 Requirements to Qualify for Invoice Factoring.
Why should I use payroll funding?
If you are considering payroll financing, it is because your business is at some risk. It could be from the tight labor market, slow-paying customers, or your startup company only has one customer with extended terms. Business owners losing sleep over meeting payroll this week must evaluate our customized options for funding.
Reasons client use Bankers Factoring for payroll funding:
- Same-day funding after approval
- Total A/R Management
- Consistent cash flow
- No hidden fees
- Distressed financial situations
- Lack of capital or reserves
When your business is just beginning operations, it can be strapped for cash. For example, if you take on a large commercial client with 60-day payment terms, with only 30 days of cash available, you will run out of funds. Cash flow shortages occur when there is a gap in your receivables and payables.
Suppose your average days outstanding (DSO) is 60 days and your typical payables are on net-30 terms. In that case, you will experience cash flow shortages without adequate funding or reserves.
Payroll Funding Example
Company ABC Janitorial is a new startup firm providing janitorial payroll and staffing solutions to its customers. ABC acquired its first customers, providing five temporary workers each week. The customer XYZ requires net 30 payment terms. ABC must pay its workers weekly and is running out of cash quickly.
ABC Janitorial sells its $100,000 in receivables or work that is already done to Bankers Factoring. ABC receives an $85,000 cash advance with a 1.5% factoring fee. Once ABC’s customers, the account debtor, pays Bankers Factoring, we issue the rebate or the final payment. The final payment is $15,000, less the 1.5% factoring fee.