BlogCommercial Finance

Payroll Funding – More Than a Quick Fix

By 09.02.20November 2nd, 2020No Comments

Julie Gaines, Senior Vice President, Business Development Officer at eCapital Commercial Finance, has partnered with staffing companies for over 20 years to successfully finance their business operations. In this interview, Julie explains the role of payroll funding for staffing companies, providing insights to current trends and how they align with financial solutions for the staffing industry

Your number one priority? Make payroll. You can’t retain and attract top talent if you are not paying wages on time. But what about your other priorities? The staffing industry is highly competitive, and companies need to stay on top of the latest trends to maintain their position. Julie Gaines, SVP, Business Development Officer at eCapital Commercial Finance shares her thoughts on what a payroll funding solution can do for staffing companies.

Q: What is payroll funding?

Julie Gaines: Payroll funding is a type of invoice financing, also known as payroll financing or accounts receivable factoring. A factoring company will purchase your invoice and advance the majority of the invoice value, which you can use to cover payroll. The factor receives payment directly from your customer and releases the remainder of the invoice value to you upon payment, minus a nominal fee.

Q: Does payroll funding also help staffing companies stay current on quarterly employer taxes?

JG: Definitely. The last thing a company wants is to fall behind on payments to the IRS. For example, if your customer pays on Net 30 terms but you pay your employees weekly, you have a reoccurring shortfall of at least three weeks payroll. A short-term solution may be to forego setting aside your employer tax for a week or two, but this is a very slippery slope. Before you know it, you reach the end of the quarter and you can’t pay your taxes. With payroll funding, your business maintains a healthy cash flow to cover quarterly employer taxes.

Q: The benefits of payroll funding are clear, but how does it relate to the top trends you’re seeing in the staffing industry?

JG: According to Bullhorn’s 2020 Global Recruitment Insights & Data, the top three operational trends in recruitment are temporary placements, technology investments and workforce reskilling efforts. In speaking with my clients, this holds true particularly for small to mid-market firms with local and regional operations. Our discussions center around how to address these trends to give them a competitive advantage. Having the payroll funding solution in place means we can work together to identify the most impactful ways to put it to use.

Q: Can you talk through an example of how a payroll funding solution is used to address one of these trends?

JG: Of course. Let’s take workforce reskilling and technology as an example. Reskilling continues to be a main focus for recruiters, with skills in today’s marketplace remaining relevant for an average of only 2-5 years. New technology is constantly changing the way we work and companies are looking for adaptable talent with skills that are both relevant and adjacent to the skills needed for the role. For staffing companies, this creates a need to up their recruitment game. Implementing artificial intelligence, virtual reality and gaming scenarios as part of the recruitment process helps recruiters better identify individuals that will grow and adapt to change. Programs such as these come at a cost. Payroll funding allows for the flexibility to pay for these types of improvements without adding debt to the company balance sheet.

Q: How does a staffing company start payroll funding?

JG: At eCapital, getting started is easy! The application process is streamlined and you have dedicated support to guide you through every step. It’s much simpler – and faster – than working with a traditional bank, and there are no restrictive covenants or added company debt. Get the tip sheet to learn more.

Thank you to Julie Gaines for taking the time to share her expertise on payroll funding and insights for the staffing industry. If you would like more information about financing options for your staffing company, please call 866.974.8892 .

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