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Compare payroll funding for small businesses

Spark growth or smooth a bumpy ride to the top with financing to cover payroll.

If you need extra financing to cover the cost of seasonal help or you’re short on cashflow and need a little extra to cover payroll costs, there are financing options available. Payroll is among any business’s biggest responsibility and as a business owner, you know that your employees and other helping hands are paramount to the success of your business. Here’s the lowdown on flexible ways to finance your payroll with as little stress as possible.

What is payroll funding?

Payroll funding isn’t one business financing tool. Rather, it’s a group of viable solutions for businesses looking for the cash flow to pay employees on time. These financing types can provide security and ensure that paycheques are funded on time.

Two specific payroll-funding options are invoice factoring and invoice financing. With invoice factoring, you sell unpaid invoices for a percentage of their value up front. Invoice financing, on the other hand, advances a portion of your outstanding invoices that you pay back with interest.

Other options include the more familiar business lines of credit and short-term business loans that can fill in the gap during the off-season and help you hire seasonal or full-time staff.

How do I finance my business’s payroll expenses?

Here are four ways to get funds to pay your employees on time:

  • Invoice factoring. This receivables financing allows you to sell your business’s unpaid invoices outright to a third party for a percentage of their value. Unlike with invoice financing, you aren’t on the hook for repayments — but selling your invoices means you could ultimately lose up to 40% or more of the services or products you’ve billed.
    Invoice factoring explained
  • Invoice financing. Rather than sell your unpaid invoices at a discount, invoice financing lets you borrow from the amount you’ve billed. Like an advance on your accounts receivables, you pay back the amount you borrow along with a fee that’s typically a percentage of the total you’re advanced.
    How invoice financing works and how much it costs
  • Lines of credit. Business lines of credit give you revolving access to funding up to an approved credit limit for a period of usually 10 years. You pay interest only on what you borrow to cover day-to-day expenses or needs that arise when your business temporarily slows. You typically only have to pay the minimum payment each month – which can help free up cash flow.
    Learn more about business lines of credit
  • Short-term business loans. In a pinch, a short-term business loan might help you cover immediate payroll expenses or other cash flow gaps with access to funding in as little as one day. But fast cash comes at a steep price: You’ll likely be saddled with high fees and high interest rates. Consider this option only if you’re certain you can repay the loan on time and in full.

Compare business loan lenders

Compare business term loans in the table below.

1 - 3 of 3
Name Product Interest Rate Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered
OnDeck Business Loan
8.00% – 29.00%
$5,000 - $300,000
6 - 18 months
6+ months
Secured Term, Line of Credit, Merchant Cash Advance
To be eligible, you must have been in business for at least 6 months with a minimum annual gross revenue of $100,000.

OnDeck offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.
Merchant Growth Business Loan
12.99% - 39.99%
$5,000 - $500,000
3 - 12 months
$10,000 /month
6 months
Unsecured Term, Line of Credit, Merchant Cash Advance
To be eligible, you must have been in business for at least 6 months and have a minimum of $10,000 in monthly sales.

Merchant Growth offers financing tailored to business needs. It specializes in providing capital based on future cash flows, but it also offers fixed solutions. Fill out an application within 5 minutes and get your funds within 24 hours.
Loans Canada Business Loan
6.60% - 29.00%
$4,000 - $500,000
3 - 60 months
over $10,000/month
100 days
Unsecured Term
To be eligible, you must have been in business for at least 100 days, have a Canadian business bank account and show a minimum of $10,000 in monthly deposits ($120,000/year).

Loans Canada connects Canadian small business owners to lenders offering financing up to $500,000. Complete one simple online application and get matched with your loan options.

Benefits and drawbacks of payroll funding


  • Promotes business growth. If used responsibly, payroll funding can be a flexible way to quickly hire new employees or even temporary staff to cover upticks in orders — helping you to successfully take on more business.
  • Cuts through a rough patch. Keep your business running smoothly through a temporary cash flow gap or seasonal ebbs and flows.
  • Customized financing options. If you have outstanding receivables, you can get quick cash with no repayments or even borrow a part of what you’re owed for a fee. You can also apply for a line of credit and have it ready for use, with some lenders increasing your credit limit as your business grows.
  • Capital with quick turnaround. You can take advantage of most payroll funding solutions in just hours or days. Even lines of credit can be set up for use in a few business days.


  • Options can be expensive. You might lose up to 40% of your invoice amounts with invoice factoring, and short-term loans can come with stiff fees and astronomical rates. Make sure that you can make up the cost of payroll funding with more immediate business.
  • Can potentially hurt customer relationships. When you sell your invoices to another company, you’re effectively selling your customer contacts. To avoid losing future business, work with a company determined to minimize potential client issues when collecting payments.
  • Can’t fix bigger payroll problems. It’s tempting to turn to these options when your business isn’t doing well. But taking on extra debt might accelerate a downward trend. Look for an option that provides exactly what your business requires to persevere through a temporary slump.

What are my alternatives to payroll funding?

Getting a business loan to finance payroll expenses isn’t the only option for businesses struggling with payroll expenses. Increase or smooth out your cash flow without borrowing by:

  • Making room for payroll in your finances. You could possibly have enough money to cover your payroll expenses if you take a look at your income and expenses and move some things around.
  • Looking for investors. You’ll lose a percentage of your business, but you could stand to make even more money by increasing your staff.
  • Cutting down on unnecessary staff. It’s not an ideal solution, but taking out a loan could be a lot more expensive in the long run than letting a few employees go.
  • Diversifying your revenue sources. If invoices are a major hurdle to paying your staff on time, consider investing resources into finding more reliable and consistent income sources to cover your overhead expenses.

Bottom line

Payroll funding is a way for businesses to retain or hire new staff while making sure that payroll expenses are covered no matter what – but it’s not your only option. Do the math to make sure that payroll funding is worth it. If you find that the numbers check out, compare your financing options to find the best fit for your business’s needs.

Frequently asked questions about payroll funding and invoice factoring

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