The Most Common Fights that People Get Into with Payroll Funding Companies
Steve Capper Principal/CEO Flexible Funding - July 19, 2017
When people call a payroll funding company looking for alternatives to their current funding company there is often a reason for the call-- usually some sort of dissatisfaction. They may be happy and cannot get out of the ironclad long-term contract, otherwise they would have already exited. Or, they can leave but only with costly termination fees.
When people first shop the payroll funding markets, they naturally look for a good price. Many are overly focused on what 'appears' to be the best price, to the exclusion of other variables. When they call another funding company to search for alternatives and complain, months later, price is usually not the thing that people are fighting over. It can be difficult to foresee problems at the initial shopping stage as every payroll funding company has great promotional materials and good sales pitches leading one to believe there could not be any future problems. And hungry salespeople will often say anything to get a deal in the door.
During over two decades in the staffing funding industry, the following items are the complaints and fight scenarios heard most often (by our company about other funding companies):
The funding customer wants out of the contract and the funding company presses them to the floor with costly early termination fees.
The funding company initially lured the staffing agency in with the offer of extra services, but did not deliver on them. A very good example is the pitch that the funding company is going to bring some customers to the table for you, or help you open a new division. Such extra services are presented verbally, not guaranteed, and never delivered.
The payroll funding company is not applying payments. Funding customers say that they know for sure that the funding company received a payment check from their customer account debtor, but it is not showing up in a funding report, collections report, reserve report, or profit report.
Unreasonable and unwarranted credit limits (or what appears to be unreasonable and unwarranted) are suddenly imposed on individual customers. And with these limits, there may be a fear of not making payroll on those accounts.)
Cannot reach the right person in the funding company to get something rectified, or get something really important done right. A person is directed to 'one unreasonable jerk' and can never get beyond that person. There might be one controller, one credit manager, or one company attorney that is abrasive and makes life miserable (which is not an excuse for contract exit.)
The funding company's holding of new reserves to cover a bad debt. It may be an additional reserve, beyond the ordinary, that was established 'at the funding company's discretion'.
Archaic and frustrating staffing softwares provided by the funding company.
Unclear and impossible to understand financial reports including funding reports, collection reports, reserve reports, profit reports, etc.
Pricing for shorter-pay receivables was a real tease and seemed inexpensive at the beginning, but the funding customer didn't really understand how expensive the longer-pay receivables would end up being. And somehow the funding company always seems to get invoices into the more expensive later-fee category.
There is a proposed or promised change at the payroll funding company that is supposed to happen soon, to alleviate a frustrating situation..but it never seems to get done. It can drag out for years. The most common complaint heard is that of horrible computer systems that are going to be updated....sometime in eternity.
A customer ignores, misses, or does not understand contract automatic renewal clauses. And the funding company does not remind them, hoping they will miss the renewal window, thus activating an 'automatic renewal clause'. If you are in a two year contract and there is an automatic renewal clause, many mistakenly assume that when it renews it is just adding a term of 'one more year'. It actuality it adds on two more years, which is an awful long time if you are already unhappy with the funding company.
There is a very good reason to be astute picking a payroll funding company. If you are dissatisfied with a payroll funding company you can certainly ask to get out of the contract, but most likely they will not let you out without a large penalty. 'Dissatisfaction' with the funding company and it's services, even if the funding company is performing horribly, is not a reason for getting out of a funding contract.
When you shop for a funding company, the worst thing one can do is to think 'if it is ever bad I will just have my attorney get me out of the contract'. This is an erroneous train of thought. Payroll funding contracts tend to be written very tough and totally one-sided in favor of the funding company. 'Secured lending' law is it's own specialty for which any general attorney would not be fully prepared.... you can't always just apply 'general contract law' to the matter. And funding companies have so much money that they can outspend you legally many times over....to most funding organizations the expense is insignificant. It is wise to forget the idea that you will ever win legally against a funding company in court. It It is better to go to arbitration, if that's allowable in a funding agreement, rather than having to go to court in the funding company's own state.
Keep in mind that if the funding company has full time in-house attorneys on salary, they have all day long to make one's life difficult. And, pay attention to detailed 'legal releases' and 'waivers' in the finding company contract fine print that strip you of your rights when you are upset. A long and ironclad contract term should not be what keeps you doing business with a payroll funding company. Excellent service, fairness, mutual respect and your own desire to stay should be what keeps you in.
Flexible Funding has always offered no-term contracts; as a result, we take pride in remaining constantly competitive in the marketplace. Our contract uses arbitration as the first-choice venue for disputes, which has never been used because of our flexible and pro-active approach to problem solving. Borrowers can request available funds anytime, and all Account payments are applied within 24 hours. At Flexible Funding, we know if our clients don't succeed, we don't succeed!