Compare 4+ payroll funding options for small businesses |

Compare payroll funding for small businesses

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

As the holiday season creeps up, you’re might be thinking about how you’ll pay the seasonal help you’ll need at your store or your team as you ride out a financial bump. But your cash flow could be sluggish for the season or tied up in invoices your clients are slow to pay.

Payroll is among any business owner’s biggest responsibilities. 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.

LoanBuilder, A PayPal Service Business Loans

Our top pick: LoanBuilder, A PayPal Service

Customizable business loans with no hidden fees.

  • Min. Amount: $5,000
  • Max. Amount: $500,000
  • One-time fixed fee charged over the life of the loan
  • Acclaimed customer service
  • Requirements: $100,000+ annual revenue, 1+ years in business, 600+ personal credit score

    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 options can provide security and ensure that paychecks are funded on schedule.

    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.

    Still other options are 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 relatively simple 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.
      Four types of 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 limit for up to 10 years or more. You pay interest only on what you borrow to cover day-to-day expenses or needs that arise when your business temporarily slows.
      Best business lenders for 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 in as little as a day. But fast cash comes at a steep price, the result of heavy fees and high interest rates. Consider this option only if you’re certain you can repay them quickly.

    Compare top online business lenders for payroll funding

    Rates last updated November 16th, 2018
    Unfortunately, none of the business loan providers currently offer loans for these criteria.
    Name Product Product Description Min Loan Amount Max. Loan Amount Requirements
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans with no origination fee for business owners in a hurry.
    Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
    Credibly Business Loans
    Funding to cover business expenses with daily or weekly repayments.
    500+ personal credit score, 6+ months in business, $15,000+ average monthly deposits
    National Funding Small Business Loans
    Working capital loans and equipment financing, some high-risk industries may be eligible.
    Be in business at least one year and make at least $100,000 in annual sales. Other loan types have additional requirements.
    Lendio Business Loan Marketplace
    Submit one simple application to potentially get offers from a network of over 75 legit business lenders.
    Must operate a business in the US or Canada, have a business bank account and have a personal credit score of 560+.
    LendingClub Business Loans
    With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
    12+ months in business, $50,000+ in annual sales, no bankruptcies or tax liens, at least 20% ownership of the business, fair personal credit score or better
    OnDeck Small Business Loans
    A leading online business lender offering flexible financing at competitive fixed rates.
    500+ personal credit score, 1+ years in business, $100,000+ annual revenue
    Fora Financial Business Loans
    No minimum credit score requirement and early repayment discounts for qualifying borrowers.
    Business age 6+ months. Monthly revenue $12,000+. No open bankruptcies.
    LendingTree Business Loans
    Multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
    Varies by lender and type of financing
    Varies by lender and type of financing
    Varies by lender, but you many require good personal credit, a minimum business age and minimum annual revenue.

    Compare up to 4 providers

    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 services humming with options to pay the people most important to your business on schedule 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. And lines of credit can be readied for fast access to funding for up to 10 years, possibly increasing as your business succeeds.
    • Capital with quick turnaround. You can take advantage of most payroll funding solutions in 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. There’s a chance you do have enough money to cover your payroll expenses, if you can move 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 ideal solution, 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 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 needs.

    Frequently asked questions about payroll funding and invoice factoring

    Anna Serio

    Anna Serio is a staff writer untangling everything you need to know about personal loans, including student, car and business loans. She spent five years living in Beirut, where she was a news editor for The Daily Star and hung out with a lot of cats. She loves to eat, travel and save money.

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