Pay Wages Before Customers Pay | Go-Factor

If your business has issued eligible invoices to other businesses, invoice finance may release cash before those customers pay. The funding can then support wages and other operating costs.

Why Can a Profitable Business Struggle to Pay Wages?

Employees must be paid on fixed dates, but customers may take 30, 60 or 90 days to settle invoices. A profitable business can therefore experience a payroll shortage even when sales are strong.

This is common in recruitment, healthcare, haulage, construction and manufacturing, where wages or subcontractor costs are paid before customer invoices are settled.

Can Invoice Finance Be Used to Pay Wages?

Yes. Invoice finance releases an agreed percentage of eligible unpaid invoices. The cash released becomes working capital and can be used for payroll, suppliers, tax and other business costs.

A provider will normally consider:

• Whether the customer is another business.
• Whether the goods or services have been delivered.
• Whether the invoice is valid and undisputed.
• The customer’s ability to pay.
• The value and quality of the sales ledger.

Understand how invoice finance works .

Can a New Business Fund Its First Payroll?

Yes. A new-start business may be considered when it has secured business customers and can raise eligible invoices for completed work.

This can help a new recruitment agency, haulage company or other B2B business pay employees before its first customers pay. Limited trading history does not automatically prevent funding, but the customers, contracts and invoices must meet the provider’s criteria.

Explore new-start business funding .

What If I Only Need to Fund One Invoice?

If one substantial invoice is causing a temporary payroll gap, single invoice finance may be more appropriate than an ongoing facility.

When Might Invoice Finance Not Work?

Invoice finance may not be suitable when the customer is a consumer, the work is incomplete, the invoice is disputed or there is uncertainty about the customer’s obligation to pay.

In those circumstances, Go-Factor can consider whether another working-capital solution is more appropriate.

What Information Will Go-Factor Need?

• The payroll amount and payment date.
• A list of outstanding customer invoices.
• The agreed customer payment terms.
• Confirmation that the work is complete.
• The amount of funding required.

Go-Factor can then assess whether invoice finance, single invoice finance or another funding solution fits the cash-flow requirement.

What Should I Do About the Unpaid Invoices?