Some payroll funding companies don’t rely on “re-factoring” your invoices to obtain their own funding and whilst this is a preferable option there are drawbacks.
Most payroll funding companies seem to claim to offer 100% funding but the reality is often very different. Many of the larger payroll funders including the high profile market leaders offer credit insurance as part of the package so that if the end customer goes bust you won’t suffer the loss but herein lies the problem as often the credit limits offered by the payroll company are too low as they look to limit their own exposure so your 100% funding actually ends up much lower and if too low means that you can’t pay your contractor and you end up with the very cash flow problems that payroll funding was supposed to eradicate.
The pitfalls don’t end there as we receive a number of enquiries from customers of one particular high profile payroll funder, most of whom claim that their cash flow is being stifled by low credit limits but as they are contracted to pay fairly high penalties if they want to get out of their contract early they end up being stuck between a rock and a hard place.
Factoring with a “proper” factoring company is one solution but even that isn’t foolproof as our page about factoring solutions for recruitment companies shows
Factoring Recruitment Solutions