Payroll Funding, Every Business Owner Should Keep this in Back Pocket
There is no doubt that if you own your own company, you are a resourceful person and probably the hardest resource to come by in any business is money. So when there comes a time, and there will be a time, when your back is up against the wall and you might miss payroll, then having payroll funding to turn to is a life saver. There are only a few true payroll funding companies in the United States. Here are a few tips.
WHAT IS PAYROLL FUNDING
Payroll funding companies are special lenders that provide financing or loans to small businesses so the business owner can make payroll. Payroll funding companies are privately owned and focus on small businesses with yearly sales of $350,000-$7 million who are established companies. These payroll funding companies are usually built for speed and provide emergency business loans similar to a unsecured fast business loan to usually profitable companies so that your employees can get paid on time. The most usual reason given for why a small business might miss payroll is because a client check was delayed but their are a multitude of other good reasons.
WHAT WILL A PAYROLL FUNDING COMPANY LOOK AT IN THEIR LENDING CRITERIA
A payroll funding company will typically look at your bank statements, an income statement, and a few other basic reports that can easily be run out of quickbooks, peachtree or other accounting packages. However, the most important part of the process is the initial interview. The initial interview will probably last 20 minutes long and in that interview the payroll funding company will be able to let you know if they can help you. If you are dealing with larger payroll funding companies then they will want the documentation up front and the larger companies will take a much longer time looking it over. The larger companies are often looking more at your credit scores, credit card debt and a lot of other indicators plus you are usually dealing with a low level admin. They are less likely to be influenced by what you say. The smaller payroll funding companies will often base more of their decision based on your interview and you will often speak directly to one of the owners. Often that owner will have started and run his/her own businesses and will be much more open minded. He/she will be looking at if you have a good business, if why you are borrowing the money makes send and if you will be able to pay the funds back.
HOW SHOULD YOU PREPARE FOR PAYROLL FUNDING
Be honest when you speak to a representative. Make sure you know your numbers. Year to year sales, net profit/loss, payroll amount, how much money you are looking for, why the problem happened in the first place, etc. will be key to giving a good first impression and for getting a quick answer. If there are any skeletons in your closet like past bankruptcies, bounced checks, poor personal credit scores and other issues, that should be communicated early in your interview because the payroll funding company will find out once they do background checks and you might lose valuable time looking for another solution. Payroll funding isn’t cheap from an interest % perspective however because the financing is usually for a very short period of time, the overall amount is cheap enough to be worth not missing payroll.