Can an Advance Payroll Funding be Used to Make Payroll?
WHAT IS ADVANCE PAYROLL FUNDING
Advance payroll funding is when a business owner gets either a loan or financing so that he/she can make payroll for the employees. There are specific financing companies that will work with businesses of all sizes and lend the business money so that it can be used to make payroll. The reason why such financing businesses or Factors exist is because companies with payroll are often real companies with real revenue and real profits. These companies might not be start ups and actually have cash flow. If you have cash flow then it typically means that a financing company might be willing to give you an advance payroll funding deal against your receivables ( the money others owe you).
WILL YOUR EMPLOYEE KNOW
No and their is nothing they have to do in regards to the financing. The financing or loan is against the businesses assets and sometimes the business owners credit. The reason why advance payroll funding is used as a term is to describe that you will be using the funds lent to pay your people. It is important to also note that your business is still responsible for paying your payroll taxes which you never want to not pay. There are more business owners that get in trouble for not paying their share of payroll taxes then you can imagine and the state/federal government are extremely strict at making sure they get paid.
WHAT WILL LENDERS LOOK AT FOR PAYROLL FUNDING
Lender who are willing to do payroll funding will look at how long you have been in business, your revenue and your net profit. Based on these major areas they then will come up with an amount they are willing to lend. It is a good idea for you to know how much you need and to only borrow the exact amount to pay your people. If you are not looking for a quick business loan then the cheapest solution is to go see your local bank and get a business line of credit but if you are looking for a fast business loan for payroll penancing then the alterative lenders will be the only place you can turn.