BlogCommercial Finance

Bridging the Payroll Financing Gap with Alternative Lenders

By 06.12.20September 21st, 2020No Comments
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Every business has cash obligations that it must meet. Chief among these obligations is payroll. Whether paid weekly, biweekly or monthly, payroll is a crucial cash need for most businesses and a key component of cash flow. Late payments and extended payment terms from large customers can strain cash flow. As more and more clients demand extended payment terms to secure the sale, businesses need to have a plan in place to manage cash flow and the demands liabilities make on the business. Payroll financing and staffing factoring from alternative lenders can become part of a comprehensive business financing solution, especially in this sustained labor market where the competition to attract new hires and retain workers is fierce.

Customer Payment Instability Can Stifle Cash Flow

Staffing companies often pay employees every week or every two weeks but invoice their customers less frequently. This “mismatch” in cash flow timelines makes managing working capital challenging. Adding in extended payment timeframes and the variation that occurs when you have clients with different extended payment terms, cash flow management can become complex. When payment expected is 45 days and that stretches to 60 or 90 days, it causes a cash shortage that can be felt in other areas of the business. This shortage can impact a company’s most valuable employees and has the potential to impact customer retention.

Back Office Administration is Hard to Scale

As a staffing company grows, so does its needs for back-office administration. Administrative tasks take considerable human capital to responsibly manage, because they require everything from tracking and calculating approved hours for workers to collecting on payroll and tax contributions, and billing clients for hours of work. For a startup or smaller established company, the administrative team wears many hats and scaling up or adding on more tasks to support their own companies can be an unreasonable solution.

Solving the Back Office so Staffing Companies Can Focus on Their Clients

eCapital Commercial Finance is in a partnership with Precision Consulting Group (PGC) to offer comprehensive administrative support for staffing companies that most alternative lenders do not provide. These administrative services complement custom-tailored payroll financing through accounts receivable financing to ensure staffing companies have a smooth, predictable cash flow without the payment liability a loan or line of credit creates. Payroll financing provides you with the cash flow your business requires to make payroll and take care of your back-office needs, including payroll tax management, client billing and contracting, onboarding of employees and workplace insurance.

eCapital has worked side-by-side with staffing companies for over 10 years and understands the challenges they routinely encounter. We believe staffing and hiring companies thrive when they are doing what they do best — building relationships and providing services — while we do what we do best, provide the funding solutions and services that closely match their business needs.