Is Account Receivable Factoring Cheaper Than Payroll Financing?
Most business owners know that successful problem solving is often about getting down to one number. That one number, when it comes to funds, is often considered to be the interest rate a fund charges but what a business owner should really care about is how much money did he pay for the fund overall.
Let’s say you borrow money from an account receivable factor that advances you money for 90% of your account receivable for 90 days along with an initiation fee plus other administrative costs. All of those costs add up. Account receivable factoring is typically a long term solution so once you decide you are going with a Factor, you will be tied to that factor for at least 12-24 months due to the funds complexity. The Factor also files UCC’s against your company which means that it will make it almost impossible for you to obtain bank financing.
The other fund consideration is a Financing company (www.payrollfinancingsolutions.com) that will fund you money when you really need it allowing you the ability to have a fall back strategy for times when your clients are late in paying you, when you had an unforeseen expense, or when you have a seasonal business. This fund can be paid back at any time and taken out again when you need it. A payroll financing companies interest rates may be higher than a account receivable factoring but the overall amount of money a business owners is paying for the fund will make the payroll financing company cheaper.
The key here is that a Payroll financing company is a short term solution and if you have an establish business that has been around for a while, often a cash crunch is a onetime event that rarely occurs. Once you get your problem solved, a short term fund is all you need to get you back on track.
Financing Solutions (www.payrollfinancingsolutions.com) provides fast business funds of $5,000-$100,000 to good small businesses with sales of $500,000-$7 million that can be used for working capital.