Payroll Finance - Loans for any purpose

Another way to boost cash flow is with an unsecured payroll finance facility

Did you know that most businesses that cease trading do so because of cash flow problems, often when they are perfectly profitable. Payroll finance is flexible form of unsecured business borrowing against the cost of your staff’s wages which you can use to help manage your cash flow. Despite its name you can use the funds brought by payroll finance for any purpose.

What is Payroll Finance? This is a form of finance which allows you to borrow in a similar way with similar costs to invoice discounting or factoring. However, in this instance the amount of the loan is determined by the wages bill for your business. Payroll finance is flexible and after a minimum period – usually 3 months – it can be “switched on” and off, as required so you only have to use it when you need to.

How it works…

With payroll finance, you would typically be offered a revolving 60 day credit line to fund your payroll costs – that is 2 months’ of PAYE and National Insurance costs. You will be charged a monthly facility fee plus interest on any outstanding balance.

When can Payroll Finance be used?

Payroll finance is an excellent fall back to ensure you have cash at times when cash flow does not permit or to cover sudden one-off payments. To qualify, your company should have been trading for two years or more and have filed at least one year’s accounts at Companies House. You must also have 5 or more employees, a yearly turnover of at least £100,000 and be profitable.

Advantages of Payroll Finance

As well as being an excellent fail safe, payroll finance brings seven other benefits:

  1. As an unsecured business loan facility no personal or directors’ guarantees are required.
  2. Nobody has to know, it is totally confidential and you don’t have to use it to pay your staff, the funds can be used for any purpose.
  3. You can repay it at any time.
  4. There are no exit, renewal, legal or set up fees involved.
  5. Once a minimum period has expired you can turn it off and on.
  6. You can use it alongside any other funding you have in place.
  7. It can be set up very quickly, often in as little as 10 working days.