How to avoid these business funding misconceptions.
Today more than ever, recruitment, contractor and labour hire businesses are relying on payroll funding – and invoice finance – to grow. Whether you’re a startup recruitment agency or well-established labour hire company, we bust five payroll funding myths once and for all.
Many businesses now see payroll funding as an effective way to plug the gap between payroll commitments and when the end customer pays. But, for others, there is still a negative stigma around business debt. What’s more, there’s a misconception that recruitment businesses have limited finance options unless you put up personal assets, such as property, as security to support your lending.
If I use payroll funding people will think my business is in financial trouble
For years UK and US businesses have been using payroll funding as a superior working capital solution for business growth. And, Australia is catching up. In fact, many recruitment agencies consider payroll funding as a first resort, rather than a final option when it comes to meeting payroll commitments. More and more businesses are understanding when you’re trading in a negative cycle and you need to pay your payroll before the end customer pays you, the question’s not: ‘Do I need finance?’, but more: ‘Where can I get reliable and fast payroll funding?’ Put simply, payroll funding has become a widely accepted smart business finance strategy – not a sign of financial hardship.
My customers won’t like it and will stop buying from me
Firstly, it’s up to you whether you disclose your funding line. And, if you do have customers who kick up a fuss (usually the ones who are the slowest to pay their bills), then the product can be provided confidentially – subject to criteria. Secondly, invoice finance and payroll funding is becoming more mainstream among Australian recruitment and labour hire businesses, and many customer bases are aware of it. In fact, many large national firms such as NatRec Recruiters use payroll funding and are enjoying greater customer satisfaction because of it.
I will lose control of my business
One of the most notable advancements in payroll funding is that there’s no longer a ‘one size fits all’ approach. Facilities are tailored to the needs of individual businesses and integrated with your systems and processes, giving you greater control over your finances.
You will lock me into a long-term contract
Lock-in contracts are no longer the norm. In fact, flexibility is now a top priority for payroll funding suppliers. Plus, as a market leader, APositive has no set up fees, no lock-in contracts, no minimum fee or break costs and no lengthy application process. It’s designed to be easy – and commonplace – to trial a payroll funding arrangement to see if it works for your business without any obligation.
Using payroll funding is too expensive
When considering the costs of using payroll funding, it’s important to look at the big picture – how best to grow your business. Sure, payroll funding can cost more than a traditional lending facility that is secured by the property, but the cash flow advantages can be far greater. For example, if your gross margin is 15 per cent and the cost of payroll funding is two per cent, then all new sales will grow your bottom line. Think of it this way: would you rather 15 per cent of $1 million worth of sales or 13 per cent of $5 million in sales? If payroll funding can help give you the freedom to do what’s most important to you – making more sales (growing your business) – it’s a finance strategy worth considering.
Find out more about Payroll Funding and use our Start Up Calculator for an estimate of cash available for payroll when you raise an invoice with APositive.