Word on the street is that payroll finance is going to make a comeback. Payroll finance was the short lived funding solution that provided the equivalent of two months gross payroll on a revolving credit facility.
Until recently there were two funders in the market providing payroll finance. Wageroller was the first company to stop trading and more recently Smartflow went into administration. Payroll finance albeit an expensive finance solution providing a working capital solution for businesses which maybe couldn’t obtain working capital via the more traditional funding facilities such as overdrafts, invoice discounting or factoring. The facility was ideal for businesses which worked on a contract basis such as construction companies. It was also very popular with private schools and also PLCs.
The advantages to the customer of payroll funding was that the facility was totally unsecured and no personal guarantees were required. In addition the funders were providing a finance product which was deemed to be a service and as such it was classed as a trade creditor. This would have been of particular benefit to PLCs or businesses with onerous banking covenants because the facility would not have affected any banking facilities.
If the product does make a come back it will be interesting in what guise it will take and what will be different that will make it succeed where it did not do before.
