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The Goldilocks Effect: Payroll Funding That Is Just Right

You’ve probably heard the well-worn story of Goldilocks and the Three Bears. In this age-old tale, young Goldilocks is out for a walk in the woods when she stumbles upon the cabin belonging to the three bears. Upon entering and realizing nobody was home, she tests out each of the bears’ beds. Finding baby bear’s bed to be “just right,” Goldilocks promptly falls into a deep, fitful sleep. In real-life, this concept of finding solutions that are “just right” is important, especially in business.

Often times, staffing companies struggle to find the ideal solution to their cash flow woes. Let’s take a closer look at what these challenges are and how they can be overcome.

Funding Your Payroll

When it comes to paying your employees, there are a number of different options available to you. Determining which one is “just right” will depend on your specific business needs and a wide variety of other factors. These options include:

Traditional Revenue Funding – That is, relying on your incoming revenue to issue payroll. While on paper this may seem like the wisest choice, in reality, it may actually be more challenging than you may realize. After all, if your payroll is contingent solely on your income, what happens during a financial down turn? Furthermore, if most of your profits are being paid back out, this type of setup can stunt your ability to grow.

Payroll Loans – Another viable option for funding your payroll is taking out a bank loan. This isn’t necessarily a terrible idea, but it’s not the right fit for everyone. It’s important to weigh the pros and cons of taking on additional debt and to assess your company’s financial ability to repay the loan without stretching yourself too thin. Additionally, if you’re finding yourself in a position to need extra funding for your payroll needs on a regular basis, bank loans could potentially make matters worse. In fact, you may not even be approved.

Payroll Funding – The third option is invoice factoring or payroll funding. Unlike the other two methods, there is no dipping into existing or incoming funds, nor does it involve incurring any type of debt (and the interest payments that come along with it). Instead, you simply sell some or all of your outstanding accounts receivable to a factoring company for a small fee. The cash payment you receive in return can then be used to fund payroll (or any other business needs you may have).

When you consider the three available options, it becomes clear that for the majority of staffing companies, payroll funding is the solution that fits “just right.” This is especially true for smaller to mid-sized firms or those that wish to grow and expand, as it doesn’t require the use of existing profits nor does it depend on bank approval or credit-worthiness.

Some of the other benefits of staffing factoring or payroll funding include:

Fast Access to Working Capital – With the right partner, you can have the funds you need in no time. Eliminate the time-consuming task of waiting for invoices to be paid or for banks to make decisions. Get your cash when you need it.

Flexibility – If there’s one thing about the staffing industry, it’s that there can be tremendous ebbs and flows in the demand for talent. With payroll financing, you don’t have to worry about how you’ll keep up with these changing demands, because you’ll always have access to the funding you need.

Opportunity – Growth is something that many smaller staffing businesses strive to achieve. The problem is, many find it difficult to compete due to financial restraints. Having access to funding when you need it allows you to take on those larger clients without the worry of how differing payment cycles might impact your business.

Customer/Client Satisfaction – When you no longer struggle to meet payroll, regardless of external or internal circumstances, employees and the companies you place them with will find your staffing company “just right” too!

Want to learn more about payroll funding? Click here or contact us today!

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