Is payroll funding right for you?
Payroll funding is the process of engaging a payroll funding company to pay your employees’ payroll taxes and benefits. It can be an excellent arrangement for employers with cash flow problems, but it has its drawbacks, too.
Here are some things to consider before committing to payroll funding.
How Long Has the Company Been in Business?
The payroll industry is relatively new, and many small payroll financing businesses are just starting up. There are also plenty of well-established payroll funding companies with a strong reputation for offering great service and fair rates.
But it doesn’t hurt to do some research on any company you consider doing business with. A financier with a long track record of funding payroll is likely to be trustworthy.
The payroll industry is full of stories about bad players and people who take advantage of small business owners. So make sure you do your research before deciding on a payroll financing company.
Know the Funding Limits of the Company
A payroll funding company sets its own limits on how much it will lend for, as well as the terms of repayment. Make sure you understand what these limits are before committing to a payroll financing contract.
Also, make sure that your payroll funding agreement includes clauses detailing what happens in case of default and termination. You don’t want to be surprised by any unfavorable consequences.
How Much Does the Company Charge?
The payroll funding company charges interest on its payroll loans, and these rates vary widely by provider. Before committing to a payroll financing agreement, find out what kind of fees you’ll be expected to pay. And that’s even for late payments.
Finding the right payroll funding company is just one part of solving your cash flow problems as a business owner. Once you have signed with a payroll financier, ensure you are diligent about paying back your loan in full and on time. Otherwise, it will only get harder over time.
Ask for References
Don’t be afraid to ask for references from payroll funding companies you are considering working with. A good payroll financing company will be happy to provide as many references as necessary. And it should make sure that all of those contacts know what they’re talking about.
It’s easy enough to find a quick list of testimonials on any payroll financier’s website, but these might only tell half the story or less. Talk directly with someone who has gone through a payroll funding agreement before signing.
Check the Company’s Reputation Online
The payroll funding industry is still relatively young, but that doesn’t mean you should be afraid to do a little online research. These days it’s easy enough to find out what other people are saying about any payroll company in minutes.
Don’t rely on one source for all of your information, though. Lookup multiple reviews and testimonials so that you can get a well-rounded picture of various payroll financing solutions.
Get the Right Payroll Funding Company
Payroll funding can be a great way to bridge cash flow gaps. But it’s not the right solution for everybody. Make sure you do your homework before committing to payroll financing and make an informed decision that will work best for your company in the long run.
