Making payroll and keeping your employees happy is critical to the success of your business. We hear from many business owners who say they encounter times when they are worried about how they are going to make payroll. This is especially a concern for businesses that are growing or in the middle of their busy season. Invoice factoring is an option to help you make payroll if you have unpaid invoices that you are waiting to collect on.
What is invoice factoring?
Invoice factoring turns your unpaid invoices into immediate working capital, regardless of your credit history or company size, eliminating the need to wait 30, 60 or 90+ days to get paid. Factoring allows you to use the funds to grow your business and cover operating expenses such as payroll, vendor payments and tax payments.
How does it work?
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, this 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 a fee.
Benefits of working with a factoring company
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.
There is no longer the need for you to lose sleep worrying about how you are going to make payroll. Invoice factoring can be the solution to get you through those times of growth and your busy seasons.