Payroll Funding: How to Get Fast Financing & Always Pay Employees

When you own a small business, operating costs can be quite hefty—especially when your cash flow doesn’t exactly sync up with your expenses. Payroll, the wages or salaries paid to your employees, can comprise a large part of these costs. If your small business can’t pay employees on time, then payroll funding might be the answer.

payroll funding

What is Payroll Funding?

Payroll funding solutions allow you to pay your employees right away, even without cash on hand, by selling invoices or receivables to obtain it.

When you often receive delayed payments from customers or clients—especially due to the nature of your business or industry—paying employees can be difficult, especially with other business expenses to think about.

82% of small businesses fail due to cash flow issues. Rather than waiting to pay employees—and risking that they quit, or stop working until they receive payment—you can cover payroll right away. 

By eliminating cash flow issues, payroll funding can also be a helpful tool as you take steps to grow your business. With payroll up to date, you can start pursuing new, larger jobs that could help you take things to the next level.

How Advance & Emergency Payroll Funding Works

Well, how exactly does payroll funding work?

When you’re running low on working capital and payday rolls around, you need another way to pay employees.

Payroll funding solves that problem by utilizing your receivables and invoices to obtain cash. Instead of waiting around for customers or clients to make payments, you can capitalize on those invoices right away by selling them.

By selling the invoice, you can receive cash for up to 80% of the value of the invoice. Then, you can put it toward any costs your business is facing, including payroll, as well as other expenses.

When customers do pay their outstanding invoices, that money will be routed directly to the lender or financing company. However, your customers and clients won’t be alerted that you’re utilizing a factoring company.

Depending on your business, you may also qualify for other payroll funding solutions, which we’ll delve into later.

Industries That Can Benefit From Payroll Funding

Regardless of your industry, payroll funding can be a valuable lifeline. In a pinch, it gives business owners the extra cash they need to make payroll—regardless of cash on hand.

That being said, certain industries suffer from delayed invoice payments worse than others. In these businesses, it might make sense to utilize payroll funding on a more consistent basis.  

The Staffing Industry

The staffing industry is one of the most popular industries to utilize payroll funding as a growth tool, and for good reason.

Staffing companies generate revenue by successfully hiring employees in new roles. For this reason, they may spend weeks working on a placement before finding the right candidate. Payment might not come for another month or two after that—leaving the business strapped for cash. On the other hand, employees have already completed the work, and deserve compensation.

Through payroll funding, staffing agencies can get the cash they need to pay employees right away, and pave the way for growth.

Medical

For most medical practices, patient copayments make up only a small percentage of working capital. Instead, most revenue comes from insurance company payments. But because of the way insurance companies make these payments, payouts are usually quite delayed.

Most insurance companies pay medical practices well after the visit to begin with, but other errors can cause these payouts to be delayed even further. Even a slight coding error might push payment off for a few weeks.

Payroll funding ensures that you can keep your practice moving forward, instead of waiting on receivables.

Construction

While construction business owners have to lay out cash for the job, they’re usually not compensated right away. Because of the ebbs and flows of the industry, most construction payments are delayed.

To continue taking on high-paying jobs, many construction companies utilize payroll funding. This allows them to keep employees satisfied, while generating revenue.

Common Financing Options to Pay Your Employees

So, your business needs funding to meet payroll needs. What are your options?

There are a few payroll funding solutions that might work for your business:

  • Invoice Financing/Accounts Receivable Financing: By selling invoices or receivables, you can utilize their value to grow your business. As customers or clients pay you, they’ll pay down your balance. 
  • Small Business Loan: As the most straightforward option for your small business, you’ll receive cash, which you’ll pay back over a set term at a set rate.
  • Business Line of Credit: The most flexible option, business lines of credit give you a set amount of cash to draw from. You can take the full amount, or a small portion, and draw more as you need it. You’ll only pay interest on what you take.
  • Cash Advance: A cash advance from a payroll financing company gives you cash in exchange for payment through future sales. 

Learn Your Payroll Funding Options After a 1-Minute Application

When it comes to payroll funding for your business, you want to ensure you’re receiving the best possible option on the table.

At National, we work within our marketplace of 75+ lenders to find you the best rates, terms and amounts. Before moving forward, we’ll explain all of the options available within our marketplace, and help you select the one that best fits your business.

To get started, apply now!

National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!

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About the Author, Matt Carrigan

Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!


Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.