Operating a small business is really difficult. We have all heard that 90% of all small businesses fail. Businesses fail for many different reasons, but under capitalization is a major reason why companies fail. Even good companies sometimes run into issues where they need capital. Sometimes a good company might have trouble paying their payroll.
The owners of these companies do not want their employees to go without pay, and that is where payroll factoring comes into play. Factoring is a way to get the money that you need so that your employees can be paid, and so that you can continue doing business as usual.
Payroll factoring works as follows, a business runs into a payroll situation where they do not have enough money. This otherwise good company has many invoices and account receivables that could give them the money at a future date. They hand over their invoices and account receivables to a factoring company, who in return gives them a percentage of the value of these invoices and receivables. It is basically using your account receivables and invoices as a form of collateral for a loan. It allows a business to get the money that they need to stay afloat.
To qualify for this form of factoring involving payroll, the factoring company will check your credit history, your credit report, your business dealings and everything that goes on with your company. They want to know that their money is not going to be an extreme risk. If you can qualify for the process, factoring is a very easy way to get the funds that your company needs. Check out a reputable factoring company and they will have all the information that you need to begin the process of using their services. It typically doesn’t take too long to get everything up and running.
As much as factoring companies are here to help you, not all of them are created the same. Just like when dealing with any other business, you need to research them and make sure that they are the right company for you. You might need to ask around, do a few internet searches, and make sure that they have a strong reputation in the industry. You’re dealing with sensitive information dealing with your business, your employees, and you want that information is reliable and reputable hands. Luckily, the majority of factoring companies are stand up and above the board.
One thing that you will find out is that many of the top factoring companies are well-known. Many of the small businesses that you know probably have already heard of them. Contacting your social and business network of small business owners will probably give you a lot of insight into which factoring companies they have used with success. Of course, check the internet for any negative or even positive information about any factoring companies that you might decide to use. Typically, the entire process goes without any hiccups, but doing your due diligence is simply good business.
As you can see, factoring for your payroll is a good way to make your employees payday when money is slow. It is a good process that allows you to get the funds that you need when you need them. It is simply using your account receivables and invoices as a form of collateral for a loan, you’re able to get the money that you need to continue to operate your business and to meet payroll. There are many payroll companies out there, and the majority of them are top-notch, so research a few of them and start the process. You’ll find that it is quite simple to get started.
