Payroll funding covers wages when the cash to pay them has not arrived yet. A big job pays on net-45, a seasonal slowdown lands on a pay week, or a new contract needs a larger crew before its first invoice settles. The work is real and the money is coming; payroll financing bridges the weeks between.
A timing problem, not a profit problem
Payroll funding works when the gap is about timing. Wages go out every week or two, while customers pay in thirty, sixty or ninety days, and growth widens that float before it narrows it. Funding fits that well. It does not fit a business that cannot make payroll because it loses money every month. Borrowing to cover a recurring loss only adds a payment to the same shortfall, and we would rather tell you that than fund it.
When payroll financing makes sense
- You have taken on a contract or a busy season that needs more staff before it pays.
- A large customer is paying late, but reliably.
- Revenue is seasonal and the slow months are predictable. Our seasonal funding guide covers this pattern.
- A one-off cost, such as an insurance renewal or a repair, landed on a pay week.
Three ways to fund payroll
Working capital. A fixed amount for a defined gap, repaid over a set term from daily or weekly payments. Best for a one-off event with a clear end, such as mobilising for a contract. See working capital.
A line of credit. Draw only what a pay cycle needs, repay when customers pay, and draw again. Best when the gap comes back every month at a similar size. See line of credit.
Invoice factoring. An advance against the invoices behind the payroll, priced partly on your customers' credit. Best when most revenue is invoiced to other businesses. Staffing agencies are the clearest case, and our payroll funding for staffing agencies guide covers it in depth.
How it works
1. Size the gap. Payroll per cycle multiplied by the number of cycles before the money arrives, plus employer taxes. That figure is what to apply for, not a round number.
2. Apply before the pay week. A soft credit pull and four months of business bank statements. Applying while the account still looks healthy gives you more options than applying the day before payroll.
3. Review the offer. Amount, total payback, payment size and frequency. Check that the payment fits a normal month, not just the month the gap closes.
4. Fund and repay. Funds land in the business account, and repayment runs as your customers pay.
What we look at
Deposits over four months and whether they cover payroll in a normal month, how payroll shows in the statements, the customers or contracts behind the gap, existing funding payments, and overdrafts or returned items. Payroll that has been paid on time, every time, in the statements is a strong signal.
A worked example
A contractor banking $120,000 a month wins a job that needs four extra crew for eight weeks. That adds about $9,000 a week in wages and employer taxes, or $72,000 before the first progress payment arrives at week ten. Funding of around $70,000, repaid as the job pays, keeps the regular payroll untouched. As an illustration only, if the total payback were $85,000 over six months, the $15,000 cost should be set against the margin on the job. If the job clears well more than that, it works. If it barely breaks even, it is the wrong job to fund.
Do not fund around payroll taxes
Federal income tax and the employee share of Social Security and Medicare withheld from wages are trust-fund taxes, and the IRS can hold owners personally responsible for unpaid amounts. If cash is short, the tax deposits are the last thing to delay. Fund the gap so that wages and tax deposits both go out on time. Nothing on this page is tax advice; speak to your accountant about your situation.
Read next: Payroll funding for staffing agencies · Line of credit · Invoice factoring
Checking what payroll funding your business qualifies for takes about 60 seconds, uses a soft credit pull only, and costs nothing. There are no broker fees. Start an application or request a callback before your next pay week.
Common questions
How quickly can payroll funding arrive?
Once statements are in and an offer is accepted, funds commonly arrive within one to two business days. Applying a week or two before the pay date is safer than applying the day before.
Can I use payroll funding to pay payroll taxes?
Yes. The funding can cover wages and the employer and withheld taxes that go with them. Keeping tax deposits current is one of the best uses, because the penalties for late payroll taxes are steep.
Is payroll financing the same as a payroll service?
No. A payroll service processes and files your payroll; payroll financing provides the cash to pay it. You can use both, and the funding lands in your business account, where your payroll service draws from as usual.