Can’t meet payroll? Invoice factoring can provide a solution
Meeting payroll is often a stress for company owners. You are out there working hard and trying to build a great business. Even when you are doing a great job, there can be times where your customers take too long to pay and it makes it difficult to pay important expenses like payroll.
Thankfully you are not alone in this struggle. Companies across Texas and the US face this same issue on a daily basis and there are a number of ways you can try to address these concerns. Below are four potential solutions that could help.
Invoice Factoring
Invoice factoring is one solution companies turn to when their customers are taking too long to pay. Invoice factoring involves selling your invoices to company that specializes in factoring. Invoice factoring can provide a flexible option to get cash quickly so you can meet payroll and other expenses.
Business Loan
Business loans are another way to help you bridge the gap from when you complete the work to when you get paid. A common type of business loan is a revolving line of credit. This allows you to draw up to a certain amount to fund these types of expenses. A business loan will come with a lower price than factoring but will be also come with more restrictions on how you operate your business.
Raise Equity
Raising equity from investors is another option. This option provides the least amount of risk, but is also the most permanent. It is more difficult to buy out an equity investor than it is to cease a relationship with a bank or invoice factoring company. Make sure you know and trust anyone you bring in as an equity investor.
Negotiate with Customers
I know, I know… You’ve probably already tried this. But if you haven’t, make sure you don’t forget to try to negotiate better pay terms with your customer. Think through how much bargaining power you have and whether there are a lot of other companies that do similar work as you. If not, you may have room to push back on the amount of time they are taking to pay you.
Another factor to consider when in this situation is what NOT to do.
Below are two considerations on things you should avoid doing.
Don’t Do Anything You Regret
Trying to make payroll and making sure your employee’s family have food on the table is stressful. This stress can often drive business owners to do things they later regret. It is admirable to do anything you can to support your business, but make sure you don’t make a rash decision and do something unethical that you will later regret or that could put you at legal risk. Take a deep breath and remember that there is some solution out there that doesn’t involve you compromising your values, you just need to keep looking for it.
Don’t Take on a Predatory Loan
There are plenty of predatory lenders out there that are looking to take advantage of you. Make sure you read the fine print carefully. Watch out for small business loans that want to have access to your checking account and draw money every day. These loans have rates in the 50-100% range which most companies cannot afford. Be careful not to rush into taking on one of these loans which may buy you some time but could eventually kill your company.
We understand this is a stressful time and we hope this article is helpful. If we can help you out in any way give us a call.
