How to finance payroll to reach your extraordinary sooner

Johnson Reed
3m read
Being able to pay your employees each month, without fail, is imperative to business success. The payroll must be kept on track throughout the year; something that many SMEs, family businesses and growing enterprises struggle with now and then. Many more companies find this monthly expenditure holds them back from moving on to that next crucial stage of growth – but aren’t aware there’s a simple solution. How to finance payroll could be an alien concept.

Want to amplify the possible? Understanding payroll finance is a good place to start. Here, we explain the basics.

Why you may need a payroll loan

Income can be shaken for all sorts of reasons. Perhaps your clients or customers are sitting on their invoices. A big expense may have come your way, taking reserve cash from the pile. It’s possible you’re in a seasonal industry – hospitality, for instance, can wax and wane depending on the food and drink you’re serving.

Payroll issues are actually quite a common occurrence. Cash flow stability can be hindered by many different elements, which eats into your ability to pay workers for their skills.

Equally, you may find that placing this aspect of your finances in good hands leaves you more able to focus on other areas of your business. Taking a loan out can mean you are able to budget more effectively – knowing exactly when to make your fixed repayments – resulting in a regained focus on business growth and future-proofing.

How to finance payroll in three steps

So, to realise your investment in people – and keep the faith amongst your workforce – there’s plenty of value in a payroll finance agreement. Essentially, this is how it works:

  • Step one: A finance specialist will speak to you, learning about the state of your business. Payroll loans work on the same principles as other loans, so credit checks and evidence must be on the table.
  • Step two: Submit the invoices you’re waiting on. Typically, the lender/s will distribute 80-95% of the value right away (or the next day) into your bank account. The remaining 5% is held until you receive projected income for the month.
  • Step three: Once that final sum has been paid to you, there’ll be a ‘factoring fee’ placed on top – the lender’s interest on the loan. The amount will depend on the industry you’re in, and your clients’ transaction records may also influence it, since there’s greater risk for the lender if they don’t tend to pay on time.

When your business is experiencing a hiccup one month or the next, it’s only right that you have a hand in suppressing it, allowing cash flow to stay clear and dependable. That’s where Johnson Reed come in.

We’re another breed altogether. There’s no need to involve a bank, you’ll receive a decision quickly (and your funds soon after), and we’ll be on hand throughout the loan term if you ever need our support and assistance. Johnson Reed are all about extraordinary financing, so you can do more with your passion and focus on other areas of your business. Speak to a representative via phone or email today. How to finance payroll? It all starts with a conversation…