Your employees are critical to the success of your business. So what do you do if you don’t have the working capital to pay them? Many contractors are faced with this dilemma for several reasons including seasonality changes in your business or because you are growing and taking on more and or bigger jobs. In order to hold on to your employees when cash flow is slow there are a few things you can do to help try and prevent them from leaving.

Cut Overhead

There are many expenses that factor into your overhead and some are truly fixed but others might be able to be lowered. Can you cut salaries or eliminate certain positions? With fewer employees is there equipment you no longer need? Can you cut down on your office space? Do you have in-office technology costs that can be downgraded or removed altogether? Any cut you can make can free up cash that can help cover your other expenses such as payroll.

Consider Cash Flow Stopgap Options

A temporary lack of cash flow can make you wonder how you will ever pay your team. One option is receiving Invoice factoring. Factoring turns your slow-paying customer invoices into immediate working capital. It bridges the cash flow gap created while waiting 30, 60, or 90+ days to get paid. Regardless of your credit history or company size, factoring can be a good option to get you through these times.

You can also use the factoring funds, after paying employees and subcontractors, to grow your business and cover other operating expenses such as payroll, vendor payments, and tax payments.

Factoring your unpaid invoices is easier than you may think and can help you make money instead of waiting to get paid. Here is how it works:

  • You invoice your customer and send a copy of the invoice to the factoring company.
  • The factoring company sends you cash, which is usually up to 80% of the value of the invoice and you receive it quickly, often in a matter of hours.
  • The factoring company waits for your customer to pay them.
  • Once the factoring company receives payment for the invoice they send you the reserves, less their fee.

Where banks will consider whether your company is financially sound when deciding to approve a loan, factoring companies don’t look at the size of your business or your creditworthiness. In fact, factoring companies look at the creditworthiness of your customers. If your business has a creditworthy commercial customer base with unpaid invoices you can benefit from factoring.

>> RELATED READING: How to Make the Factoring Application Process Lightning-Fast

Sall-leaseback Your Equipment

There are a few ways that partnering with an equipment leasing company can help free up working capital to pay your employees if you currently own equipment. A sale–leaseback is one option. With a sale-leaseback, an equipment finance company purchases equipment from the company currently owning and using it. The leasing company then becomes the lessor and leases the equipment back to the original owner, who is now the lessee. In other words, the leasing company buys your bulldozer from you outright, then leases it back to you at a lower monthly payment freeing up capital for your business.

For contractors struggling to cover payroll, once you are able to find an immediate solution, you would be wise to take a look at your business and see what plans you can put into place to ensure it won’t happen again. Can you restructure your staff, change your pricing, or change your vendor relationships? By examining all of these things and others you could put your business on a more secure financial path.

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