Your staffing firm has outgrown its payroll funding partner, and it’s time to canvass the market for a better option. But where do you start?
First, you need to determine what type of payroll funding you need. Explore traditional banking partners, which will offer loans or a line of credit, and see if those terms, including interest rates and arrangements, suit your situation. Remember to explore the covenants you will need to maintain to stay in the bank’s good graces. Factoring companies, on the other hand, buy your accounts receivable for a fee and advance 90 percent or more of the invoice amount. There are pros and cons to each type of payroll funding, so ask questions until you fully understand how each option could affect your business.
Consider the importance of working with a partner that specializes in the staffing industry. A payroll factoring company will better understand how your business operates and its unique needs compared to banks and other financial companies that service businesses in myriad industries.
Another consideration is what services you need. Some payroll funding companies offer money-only services, in which the partner provides the payroll funding, but you process your own paychecks, print your invoices and file and pay your own taxes. Full-service payroll funding partners, on the other hand, are capable of handling much more. Full-service payroll funding companies manage the critical yet time-consuming back-office administrative functions, such as printing paychecks, submitting invoices, and filing and paying payroll taxes.
Also consider the importance of flexibility. If your agency is small but poised to grow, you’ll want a payroll funding partner that’s willing to give up-and-coming businesses the attention you need but that is also capable of scaling up to service established firms.
With this information in hand, you can begin to narrow the field by talking with peers in the industry. Ask for referrals and/or the experience they’ve had with different payroll funding partners. Now that you have a list of companies that meet your criteria, you can begin making calls and asking specific questions to determine which of these potential partners can meet your specific needs. Then you’re ready to get, and compare, quotes for services. Remember, the lowest quote is not always the best deal for you.
There are many factors that determine whether you’ve got the right payroll funding partner. Take time each year to review your relationship, even if you think the service you’re receiving is great. It’s possible that a better partner is out there, one who can provide the full-service options and flexibility to scale with you as you grow.