Funding Limits - Staffing Customer Account Ineligibility

In payroll funding, when a funding organization offers price and advance rates that seem too good to be true, the flip side is often customer-account loan ineligibility. Loan covenants in the final documents can easily take back a significant portion of what the salesperson, proposal, or term sheet first offered in total funding availability. Look for these legal clauses/covenants because a good price would not do you any good if you don’t have enough cash now, or in the future when you get a large account(s).

The typical limits are as follows:

1. Entire business concentration percentages. When any one account becomes a certain concentration percentage of your entire business:
   
   
   1. There are limits on availability amounts for that customer for the above
   2. That customer is eliminated entirely from availability for the above
   3. It can change the rules about how and when they may use or adjust reserves from that account, or other accounts, to cover it

2. When a certain percentage of an account/any account goes over 60, 90, 120, etc. days unpaid, the “total amount” over 60, 90, 120, etc. days, becomes ineligible.
   
   
   1. This may change the rules about how and when they may use or adjust reserves from that account, or other accounts.
      

3. When a certain amount of an account goes over 60, 90, 120, etc. days unpaid, the “entire customer” is eliminated from availability (not just the amount that has gone over 60, 90, 120, etc. days.
   
   
   1. This may change the rules about how and when they may use or adjust reserves from that account, or other accounts.
      
      
4. Cross Aging Percentages. This involves “cumulative combinations of any of the two or three (A, B, C) above”. Cross aging are the most dangerous limitations on availability.
   

1. This may limit availability on a specific concentration account.
2. May limit availability on your other non-concentration accounts.
3. This may change the rules about how and when they may use or adjust reserves from accounts

Any of these limits can be seen in any program but the cross aging percentage limitations are most likely to be found in funding only programs such as bank-owned payroll funding (not bundled with back office services).