Payroll funding allows businesses to access immediate cash to meet their payroll obligation. This type of funding is particularly useful for small businesses that have limited cash reserves and face significant payroll requirements. It is also known as payroll financing, payroll factoring, or payroll funding factoring. In essence, payroll funding is a cash advance against the money that is due to a business from its outstanding invoices. The funding provider pays the business a percentage of the value of its outstanding invoices, and then collects the full amount of the invoice when it becomes due.
Payroll funding works by leveraging the value of a business's outstanding invoices to provide immediate cash. Here's how it works:
Step 1: The Business Provides Invoices
The business provides its invoices to the payroll funding provider. These invoices represent money owed to the business by its customers. The payroll funding provider verifies the validity of the invoices and checks the creditworthiness of the customers who owe the money.
Step 2: The Funding Provider Advances Funds
The payroll funding provider then advances a percentage of the value of the outstanding invoices to the business. The exact percentage depends on a variety of factors, including the creditworthiness of the customers who owe the money, the industry in which the business operates, and the terms of the invoices.
Step 3: The Business Pays Its Employees
The business uses the cash advance from the payroll funding provider to pay its employees. This ensures that the business can meet its payroll obligations on time, even if it has limited cash reserves.
Step 4: The Funding Provider Collects the Invoice
When the invoice becomes due, typically 30-60 days (OAC — exceptions apply), your business reimburses the funder. This allows your business to optimize its cash flow with every pay cycle so your operations can carry forward as planned.
Step 5: Repeat the Process
The business can repeat this process as needed. It can submit new invoices to the payroll funding provider to obtain additional cash advances. This allows the business to manage its cash flow more effectively and meet its payroll obligations on time.
BONUS: Outsource Your Payroll Processes
Some payroll funding partners will take care of the financing, administration, and processing of your regular payroll payments, which also includes calculating and applying all relevant payroll deductions. Integrated payroll funding saves you time and money by allowing you to focus on other critical details of operating your business like expanding your team and scheduling new projects.
Payroll funding is a valuable financing option for businesses that need immediate cash to meet their payroll obligations. It provides businesses with a flexible financing option that does not require collateral or create debt. With the ability to access a steady stream of cash and improve their creditworthiness, businesses can use payroll funding to manage their cash flow more effectively and grow their operations.
Matrix is a payroll service provider that helps to make sure your employees are paid in full and on time. We provide seamless payroll funding for small businesses, which also includes calculating and applying all relevant payroll deductions. This ensures your business is complying with your jurisdiction's employment laws regarding salary by paying your staff the full amount they're due, and doing so on time. Payroll funding can be a great resource for your company. If you are a small or medium-sized business that needs to balance employee payroll with incoming payments, call the experts at Matrix Labour Leasing staffing agency in Calgary at 1-866-666-9520 or fill out the contact form.
Q: What are the costs of payroll funding?
A: The costs are determined by the amount of funds that you apply for and the strength of your current credit score. With that in mind, our payroll funding is priced extremely competitively. Contact us today to learn more!
Q: What are the payment terms?
A: Our flexible repayment policy ranges from 15 to 60-day payment terms.
Q: What are the qualifications to apply for payroll funding?
A: Matrix Labour Leasing in Calgary requires approved credit and proof of good invoicing practices.
In the spirit of reconciliation, we acknowledge that we work on the traditional territories of the Blackfoot Confederacy (Siksika, Kainai, Piikani), the Tsuut'ina, the Îyâxe Nakoda Nations, the Métis Nation (Region 3), and all people who make their homes in the Treaty 7 region of Southern Alberta.
