For new startups or small businesses, payroll funding can allow you to steadily pay your employees, even while you’re getting off the ground. Payroll funding enables you to hire the employees you need to fulfill your company’s responsibilities before your clients have paid their invoices.
In some instances, the vision of your company’s future is made possible with payroll funding. You need employees to work, or you’ll never get any sleep trying to work every role in your own company. But if this is your first round of orders, how can you pay your employees without having been paid?
That’s what payroll funding is for, folks.
So, how does payroll funding work?
What steps are there to take?
And how long will it take to receive your funds?
We’re answering these questions in today’s blog, so stay tuned to learn more!
What Is Payroll Funding?
Simply put, payroll funding allows you to sell your invoices to a payroll funding company in exchange for cash for your payroll. Payroll funding gives you capital to hold you over until your clients pay what they owe you.
Payroll funding is geared toward small businesses and startups that are establishing themselves in their fields. Before a payroll funding company loans money to you, it will examine the health of your company and your clients. This is to protect themselves from loaning out money that never gets paid back should a startup not make it.
Payroll funding is ideal for startups that give clients 30, 60, or 90 days to pay their invoices. Most companies pay employees every two weeks. If you’re relying on payments from clients to make your payroll, you might have enough for one payroll period, but not for both.
Payroll funding ensures that your employees get paid while you wait for clients to pay their bills.
How Does Payroll Funding Work?
So, it sounds great, but how exactly does it work? That’s what we’re discussing in this section!
Gather Your Invoices
If you know you won’t be able to pay your employees with the cash you have on hand, it’s time to find a payroll funding company. You should start by gathering all of your invoices for the pay period. Those invoices will determine how much money you can get from a funding company.
Typically, a payroll funding company will give you 90-95% of the amount you’re owed on your invoices. They’ll pay you the remaining five to 10% once your clients pay their invoices and you can pay back the rest. It’s their safety net for loaning you money.
Find A Reputable Payroll Funding Company
Once you’ve gathered your invoices, it’s time to find a reputable company to sell your invoices to. Taking just a few minutes to research “payroll funding company near me” can allow you to find a good company to work with.
We recommend reading company reviews to ensure they treat their clients well and handle their payroll funding in a timely manner. The last thing you want is the inability to pay your employees because your payroll funding company fell through!
Pay Your Employees
Once the payroll funding company has done their due diligence checking on your business’s health, they’ll let you know if you’re approved for funding through them. If you are, they’ll create an account for you where you’ll receive that 90-95% we mentioned earlier. You’ll then use those funds to pay your employees.
Pay Back The Payroll Funding Company
Once you reach those 30, 60, and 90-day markers when client invoices are due, you’ll send the money you receive to the payroll funding company. Once they’ve received the money, the funding company will pay you the small amount they withheld as collateral when they bought your invoices.
This process is repeated every time you need payroll funding to pay your employees. However, if you work with the same payroll funding company, they won’t go through an approval process every time.
Benefits of Payroll Funding
Give Clients Time to Pay Their Bills
Payroll funding is a great way to retain your employees while giving your clients time to pay their invoices. Your clients will appreciate having breathing time before their bill is due. Having immediate due dates is stressful, and some companies rely on their own sources of revenue to pay their invoices.
Pay Your Employees On Time
Your employees will appreciate being paid on time. There’s nothing worse than payday arriving without getting your direct deposit. Employees who face this problem likely won’t be loyal to the company, but will instead look for employment with a more established business that can make payroll.
Your employees will appreciate your due diligence in ensuring that they are paid on time, every time.
Payroll Funding Is Fast
Unlike many loan options that take forever to process, payroll funding is a fast process. You’ll typically receive funds within one to two business days. No need to panic if you realize a week ahead of time that you can’t make payroll! Having said that, we recommend finding a payroll funding company as far in advance as possible.
Red Ridge Financial Can Help.
Red Ridge Financial provides multiple loan services for small businesses, including payroll funding. Our simple process includes three steps: discovery, relationships, and procurement.
These steps allow us to tailor our services to your specific needs and get to know you as a company. We want to serve you the best way we can, which means understanding who you are and what your company has to offer.
Using Red Ridge Financial’s services won’t hurt your credit at all. We recommend applying for start-up funding with a cosigner if your credit is under 680, as this will increase your chances of being approved.
We offer low rates, low monthly payments, flexible plans, and approval dates for business financing.
Ready to get started? Apply now on our website, or contact us at info@redridgefinancial.com if you have questions. Let Red Ridge Financial get you the payroll funding you need for your small business!
