Payroll funding is a loan that is offered to a company with accounts receivables standing in as collateral. The company does not take the money that the customers owe it but allows the lender to take the money as a loan payment. These are the pros of payroll funding.
These loans increase cash flow in the company for you to have enough working capital. The rest of the money belongs to your company after the lender deducts a percentage that you agreed upon because the lender is not entitled to the entire amount the customers pays.
You will get the loan at a very affordable interest rate. The interest rate is assessed and analyzed by the lenders using the value of the business assets you, your company’s credit history, the customers’ credit ratings, the amount of money you are requesting and the duration the customers will take to pay the debt they owe you.
The loans offer you a lot of flexibility. You are free to negotiate for an affordable interest rate and payment plan that you will be comfortable with. You can get a lender who will fund you with payment plans that you are satisfied with after comparing several lenders.
You will not be left with a debt on the balance sheet when you get this loan because things balance themselves out. The payroll funding is a liability, but the accounts receivables are the collateral, and they are assets hence they balance each other.
The funding secures the jobs of your workers. You may need to lay off some of your workers if you have no money to pay them, but when you get the loan you will be able to cater for all the salary expenses in the company.
Your employees are empowered financially when you get payroll funding and pay them on time because you will reduce the cases of employees asking for loans or advance payments. The employers feel it is an achievement when employees’ financial status grows, and their lives transform positively because of working for the company because it is the greatest thing an employer can achieve aside from increasing revenue in the company.
Payroll funding increases job satisfaction in the workers hence they will put in more efforts and increase the quality and quantity of production. You will be able to avoid withholding the salaries of employees for longer than they can bear when you get the loan to pay them. It hurts employees to work but get paid late hence most of them decide to resign if the trend continues for a while.
Payroll funding allows a small business to hire the best talents from the market. When hiring experienced and skilled employees who have worked in other companies that will bargain for higher pay because they know that aside from adding values to your staff they will also help in-house training. Payroll funding will enable you to provide the salaries of these employees.
You can pay payroll taxes using payroll funding. Failure to pay payroll taxes can cause severe consequences for your company because the authorities will be on your case day and night. If you pay payroll taxes late, you will be fined, and those are debts you should avoid because they are valuable to the company.