A payroll advance refers to a personal loan product that allows an individual to receive an advance from a future paycheck, usually in exchange for a flat fee. These loans have a repayment requirement, usually in two to four weeks, and carry a relatively high interest rate. If someone defaults on a payroll advance, there are steps that are taken by the lender to recover those funds including collections activities and negative reporting to credit bureaus.
Payroll funding, on the other hand, refers to a process whereby a business obtains the cash necessary to cover its payroll obligations. Most companies have a reserve in their bank accounts to cover their payroll obligations, however if a business lacks the necessary funds to cover their payroll, they can sell invoices to a factor like us to receive payroll funding. Payroll funding through an accounts receivable financing company like ours is not a loan and there are no repayment obligations. Since there is no repayment obligation, there is no risk of default or negative credit reporting. It is a simple sales transaction that helps companies meet their payroll obligations and keeps their businesses running smoothly. This makes it an ideal solution for businesses looking to cover a short term financial shortfall.
If your company could benefit from payroll funding to ease cash flow concerns, fill out a rate form and one of our Business Development Associates will give you a call to discuss your situation further.