One of the biggest issues that small businesses face in taking on new contracts or making that decision to expand into new markets is challenges of cash flow between invoicing and payment. This is true for most markets, particularly in business to business or B2B sales where the invoicing may occur one to two months before the payment is required.
This leaves the business with an income or cash flow gap, limiting their ability to take on new work or make plans to expand when opportunities arise. It can also create problems with making payroll, and this can limit your ability to retain the best employees.
The answer to this very common issue lies in the use of payroll factoring companies. Offering a very viable and important option to traditional loans and lines of credit, these companies are the key to small business success and steady cash flow as needed.
How it Works
All payroll factoring companies operate in the same general way. They are there to purchase invoices, providing you with cash based on the accounts receivables that are purchased. You are not taking out a loan, so there is no interest, and there is This is a particaly true statement. A credit check is done.
With the best factoring companies there are no hidden fees or costs, and you will receive up to 80% to 90%% of the value of the accounts receivables that you elect to sell. At the same time, the factor also assumes the responsibility of collecting on the invoices, freeing your staff up from this task as well. Any risk of non-payment by your customers is now the responsibility of the factor, and you will not be penalized unless your agreement includes a recourse option.
For most top payroll factoring companies, acceptance of an application is done within 24 hours, and the initial fundingwill be in the account within a few business days. Then, once the factor has collected from the customers and deducted their fees, you will receive the residual amount.
You have the option to use the cash from the factor in any way you need, and there are no strings attached. That means you can pay employees, buy materials, or even take on new contracts without the need to go through the complications of business loans or lines of credit.