Everything You Need to Know About Payroll Invoice Factoring

Updated: Sep 14

Regardless of the type of business you have, you must have employees and workers to pay on a certain schedule. Focusing on the company’s cash flow is essential, especially when it is about making the payroll deposit. However, if businesses do not have sufficient cash flow to pay their employees, they may create problems. The missing payrolls become even more stressful and frustrating when there is a pile of invoices ready to add to the company’s cash flow. These invoices indicate the hard work and efforts your sales employees have made to add to your revenues. However, you cannot put those invoices and bills to your company’s advantage until customers pay them. This is when you can introduce payroll factoring to your business and Porter Capital is here to provide the funding. Before we delve into the discussion of payroll invoice factoring, let’s have a brief overview of invoice factoring.


What is Invoice Factoring?


Invoice factoring or receivable refers to a process of selling invoices of a company to a factoring company. The financial solution allows companies or businesses to receive immediate working capital after subtracting a small percentage for the provided services. This way, businesses get access to the fast cash that they can use for maintaining payrolls for their employees.

How does Payroll Invoice Factoring Work?


Payroll factoring typically is a process businesses choose to turn their outstanding invoices into immediate cash to make payrolls in the pay period. The factoring companies like Porter Capital excel at providing easy financing solutions to the businesses. Businesses can receive easy funds without having to take on additional debt by using bank loans to fulfill their financial obligations. The best part of opting for payroll invoice factoring is that it uses outstanding invoices, as collateral businesses need to keep their cash flow moving. Porter Capital, for example, does not put businesses through hectic procedures of credit checks. The factoring company is only interested in the customer’s creditworthiness.


Difference between Payroll Loans and Payroll Factoring


People often confuse payroll loans (also known as MCAs) with payroll factoring because they sound similar. However, some key differences make these two financing solution poles apart from each other. Knowing these differences may have a long -term impact on the business. Payroll loans are typically short-term loans and cash advances. They are generally taken for a small amount of cash. A business owner can borrow money from lending services. The cash comes with the total amount of loan and interest fees. Borrowers are bound to repay the loan amount on the specific date.


Payroll factoring (aka invoice factoring), on the other hand, is not a business loan. In factoring relationship, businesses sell their current account receivables or invoices to a factoring company to get 95 percent of the invoice amount to pay their employees. The key benefits of payroll factoring include back-office support that saves money and time, zero up-front charges, no need for additional company debts, and easy credit recovery for startups.


How Invoice Factoring Solves Payroll Problems?

  • Protect Personal Funds

This is no doubt one of the potential benefits of choosing invoice factoring. It protects the personal funds of business owners, especially when they make payrolls. Using personal funds including saving accounts, retirement accounts, and family accounts is very common for business owners for making payrolls. Many business owners make this mistake to avoid the IRS problem, bankruptcy, and lawsuits that they may face if they fail to pay employees on time. Luckily, invoice factoring is flexible financing solutions that can help entrepreneurs prevent these situations. With this ultimate solution, entrepreneurs do not need to resort to drastic measures.

  • Prevents Layoffs

There is no denying that layoffs are one of those things that all employers want to avoid, particularly when their business is in the growing phase, and they are availing new opportunities. Factoring invoices to a reliable firm like Porter Capital enables employers to retain their potential employees, especially when they need them. By making timely payroll, employers can make payments on time and keep up with the situation.

  • Decreases Expenses

One of the latest published articles of Donald Todrin, CEO of Northampton, recommends collecting money by requesting reduced payments from customers in exchange for paying the cash immediately. Employers can accept up to 50% hit on heavy receivables to cover the amount of payroll. The businesses that work with factoring companies; this cost of immediate cash would be incredibly less. Porter Capital, in this regard, charges only a small percentage of invoices of customers agree to pay immediate payment.

  • Reduces the Need for Additional Debts

Traditional business loans make another easy option for employers and business owners. However, these loans need to be paid within a certain time limit and that too with interest. To make the matter worse, many startups and small businesses do not have enough credit history when it comes to qualifying for loans. Unlike traditional loans, invoice factoring does not require sufficient capital and credit history. It only involves selling invoices. That is to say, there are no additional debts, drawn-out approvals, or interest payments as long as business owners factor their invoice.

  • Takes Care of Employees

It is not about only avoiding state or federal tax liabilities or avoiding lawsuits and IRS penalties. It is also not about just keeping your company or cash flow afloat. Whether you want to manage payrolls for a huge corporation or small business, it is important to pay employees and workers on time. It is one of the vital strategies to retain potential employees. Invoice factoring is undeniably is an excellent solution to keep your company’s cash flow running. It has become an integral part of the businesses, which rely on the seasonal cash flow and need a reliable source of finance to pay your employees. Invoice factoring is the right solution that enables businesses to bridge the gap between making checks for employees and collecting payments.


Bottom Line and Where to Get Payroll Factoring

In a nutshell, payroll invoice factoring is a relatively easier financing option for businesses struggling to pay their employees on time. It helps companies keep their cash flow afloat and retain employees. In addition, it strengthens the relationship of businesses with their employees. Porter Capital has been in business for nearly 30 years and is always focused on customer service with all of the company's payroll factoring clients, which is one of the specialties that Porter Capital deals with on a daily basis. So if you are looking for invoice financing or payroll factoring for your staffing company (or business) click here to apply now (and have the possibility to get funded within 24 hours).

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