business contractBusinesses should avoid a long-term financing contract with a company when it comes to payroll funding if possible. A longer contract often means a more complicated contract that comes with strict conditions and is looked over by several lawyers to make sure the contract benefits the funding company. Most of the time, if there is a problem with the contract, the other party (meaning you) is going to lose out.

Why This Could Present Problems

Finding a better deal

If a client finds another company that offers better terms, they will have to wait until their contract is up to sign on with the new firm. By that time, the new company’s terms may have changed and the deal could no longer be valid. Companies of all sorts have sales to attract new business, but those only last so long. A client must be available to sign up for the deal within the allotted time.

If they change the conditions

Often, the company that takes care of funding payroll has the right to alter the contract without the other party’s permission. They may change rates, regulations, fees, or even length of the contract. This is a commonly used way for companies to keep their existing clients who are planning to leave and to close loopholes in the previous contract.


Some confrontations are unavoidable, and a company may wish to take their business elsewhere. The company cannot do that if it has a long-term financial contract with a payroll funding firm that does not expire for another year. The uncomfortable business relationship must continue until the contract is up, creating more stress and tension between colleagues.

Contract renewal

Whether or not a client wants to renew their contract with their payroll funding company should be their choice, but several companies will automatically renew the contract unless told otherwise by a specified date. It is another way for companies to keep a client not wishing to renew their contract detained in the payroll funding company’s services. Longer contracts are easier to forget about renewing or telling the company not to renew, so the client has to work with the payroll funding company for several more years.

Penalties and fees

When a client finally terminates a contract, especially if it is before the terms have expired, there are usually several fees they have to pay to cancel their service. Sometimes they use lawyers to determine the maximum amount they can charge for cancellation. The client may even have to pay for the whole contract or more to get out of it. Payroll funding companies can also increase their rates at any time with a client still locked into a contract.

There are several ways to avoid a long-term financing contract, like asking firms about shorter contracts or working with a lawyer to read through the contract and negotiate on the client’s behalf. This process can save a company thousands in payroll funding expenses and take away much of the stress of dealing with payroll funding companies that don’t have your best interest at heart.

There may be times where your company needs payroll funding. Search for a company that doesn’t require long-term contracts and won’t make you borrow more money more often than you need.