The loss of trust can linger for years. More immediately from a business standpoint, if you don’t pay employees, they have the right to file a state wage claim, and you can be subject to other hefty penalties as well under state and federal (like the Fair Labor Standards Act) laws. If quarterly payroll taxes aren’t paid, then you may have to deal with IRS penalties and fines.
While the Department of Labor offers guidelines for reductions in pay, work hours, etc., there are other steps you can take to make payroll on time. The following three tips help companies in temporary lack of cash flow avoid IRS penalties, legal claims, and disgruntled employees.
Offer a discount on products or services. A month-end sale featuring discounted prices on cash payments could be the least complicated way to increase cash flow. Chances are good inventory will sell off quicker. While the return won’t be as high, the cash infusion from more sales can help fund your payroll immediately.
Another way is to expedite outstanding payments. Try contacting customers to collect receivables faster. Discount them for paying right away or early if they’re on extended payment terms. You’ll also want to be aggressive with past-due accounts.
Ask for an extension on any agreement or contract terms on payables from other customers / clients and business associates such as your supplier. The cash you save now will help pay your employees.
A more extreme measure is to liquidate surplus inventory. Liquidation companies and online marketplaces can help expedite sales and get at least some cash profit in your hands when you need it.
2. Obtain Cash from Investors
Return to investors for the same reason you went to them in the first place. You need to cover operating expenses, specifically now, payroll. Investors already believe in you and are good sources of quick cash. Going “back to the well” too often, however, also translates into loss of trust and confidence, soon enough, so choose that moment carefully. Friends and family members may be receptive to lending some cash, though, again, only if you’ve maintained their trust in what you’re doing.
3. Take Out a Loan
A small business loan is a good alternative to using a credit line or borrowing in other ways. It’s not usually hard to find a lender. The problem is, some traditional ones and even banks often have complicated processes and rules. A less than ideal credit score can result in a denial.
The Small Business Administration has a few loan programs as well. Here’s an overview:
General loans provide financial help for your business.
Small, short-term microloans are also available.
A basic loan may be enough to get your deserving employees paid.
This option is lengthy, and can take up to 90 days to get funding or to be alerted of a denial. This may not be the best choice to make payroll.
Factoring companies are another possible solution similar to a loan. These companies buy unpaid invoices at a discount. If there is an existing relationship with them, the cash infusion can be immediate. However, for first-timers, it may take up to a week or 10 days.
Bridge loans are growing in popularity. New types of loan firms are providing alternatives to banks that deliver results. A relatively small business loan can make a big difference in payroll and business operations.
Look to the offerings from Zion Finance - Lend Up. With our loans, it may only take 5 minutes to pre-approval, may only require 3 documents, and can often fund as soon as the same day.* Visit our site to familiarize yourself with various loan amounts, interest rates, how to apply for immediate loans, and more.
WE CAN HELP YOU WITH A QUICK LOAN!
Do you need a quick loan today? Zion Finance - Lend Up can help you with the loan you need, we offer personal loans and loans for business development. To apply e-mail: zionloanfirm.ltd@aol.com
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