Best Payroll Loans
Compare top lenders to find the right funding for your business.
| Lender | Best for | Starting rate | Amount | Term | |
|---|---|---|---|---|---|
|
Need same-day funding | 42.00% (Test suffix) | testing | 12 – 24 months | |
|
Have fluctuating revenues | 13.00% |
$5M – $1.5B |
4 – 18 months | |
|
Are startups | 4.66% (suffix) |
$1k – $1.5M |
Not specified |
Best payroll loan lenders: More details
Best for: Same-day funding – OnDeck
- Same-day funding available
- Transparent eligibility requirements
- Funding only requires a soft credit check, meaning it won’t affect your credit score
- Higher starting interest rates; it’s an expensive way to borrow
- Can only draw $1,000 to $10,000 per day with the instant funding option
- Funding not available in North Dakota
When you need same-day funding, consider OnDeck. The company offers an “Instant Funding” feature that allows line of credit borrowers to have draws deposited into a supported business checking account in as little as 30 minutes.
Plus, OnDeck offers perks that make applying simple. For one, it’s transparent about its eligibility requirements, which helps you know if you’ll qualify. For another, applying only requires a soft credit check, so your score won’t be impacted.
Still, borrowing from OnDeck isn’t cheap. Its advertised starting rate for a line of credit is 42.00% Minimum APR offered to at least 5% of customers (not the lowest rate offered) , so you’ll need to plan for that added expense. In addition, the company limits how much money you can borrow through instant funding to one draw worth up to $10,000 per day. Depending on the size of your payroll, that may not be enough to keep your company afloat.
Read our full OnDeck review.
In order to qualify, you’ll need to meet OnDeck’s criteria of:
- Minimum credit score:
- Minimum time in business: 25 months
- Minimum annual revenue: 800000
In order to access instant funding for OnDeck’s line of credit, borrowers must also keep a working debit card on file with the company. The debit card’s information must also match the information provided for your OnDeck account.
Best for: Fluctuating revenues – Fora Financial
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- High borrowing amounts up to $1,500,000,000
- Offers a prepayment discount
- Quick access to funds (within 24 hours)
- Charges a factor rate, making it harder to estimate the cost of borrowing
- Charges a 0.00% – 2.50% origination fee
- Doesn’t help build your business credit score
Businesses that have fluctuating revenue may want to think about using Fora Financial’s revenue advance. In this case, your repayment amount is based on a fixed percentage of your daily or weekly sales, meaning you’ll owe less when business is slow. As an added bonus, the company boasts a 24-hour funding time for this product and offers a discount if you’re able to pay off your advance early.
That said, Fora Financial charges a sizable 0.00% – 2.50% origination fee on its advances. Plus, since they advertise a factor rate rather than a simple interest rate, it can be much harder to estimate how much borrowing will cost in total.
Read our full Fora Financial review.
In order to qualify, you’ll need to meet Fora Financial’s criteria of:
- Minimum credit score:
- Minimum time in business:
- Minimum annual revenue:
Best for: Startups – Fundbox
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- Higher borrowing limit than some competitors ($1,500,000)
- Available in all states and many U.S. territories
- Short time in business requirement of three months
- Typically takes up to two business days to receive funding
- Payments must be auto-debited from your account
- Relatively short repayment terms
Startup businesses may want to look into using Fundbox for their payroll financing. The company offers a line of credit of up to $1,500,000 with only a 3 months time in business requirement. As an added bonus, its starting interest rate of 4.66% for the 12-week repayment plan is pretty affordable, and funding is available in all 50 states.
Be advised, however, that Fundbox financing has relatively short repayment terms. In addition, payments must be auto-debited from your account on a weekly basis, unless you subscribe to Fundbox Plus. Funding can also take longer with Fundbox than with some competitors.
Read our full Fundbox review.
In order to qualify, you’ll need to meet Fundbox’s criteria of:
- Minimum credit score: 600
- Minimum time in business: 3 months
- Minimum annual revenue:
What is a payroll loan?
Payroll loans are a type of short-term, small business financing used to help pay a business’ employees. For example, you can use a payroll loan to fund employee paychecks or pay invoices received from independent contractors.
In addition to wages and salaries, payroll loans can help with employee benefits, taxes, commissions and bonuses.
Types of payroll loans
There’s not one single loan type called a payroll loan — a lot of different funding options can be used to cover payroll. Which one is best depends on how your business operates and what its cash flow looks like.
Short-term business loans provide a lump sum that is typically repaid in fixed daily or weekly installments over three to 24 months. They often come from online lenders, which have more lenient requirements than traditional brick-and-mortar banks, and you can get your funding as soon as the next day. They may also come with higher interest rates, ranging from about 7% to 50% or higher. Make sure to compare the total cost of borrowing when comparing lenders.
Short-term business loans can be particularly useful for covering one-time payroll expenses.
A business line of credit is a revolving line of credit your business can borrow from on an ongoing basis. You only pay interest on the amount you use, and your line of credit replenishes as you make payments.
They can be particularly useful for businesses with seasonal slowdowns that might need to cover payroll during downturns, with extra cash to pay it back when the season picks up.
Terms typically range from 12 weeks to five years, and lenders often charge higher rates for longer terms. You may pay an origination fee, maintenance fee or draw fee in addition to interest, so pay attention to the total cost when comparing lenders.
A merchant cash advance (MCA) is a lump sum that is repaid as a percentage of your future sales. Merchant cash advance companies typically use a factor rate to express the cost of the advance and collect daily or weekly over the course of three to 24 months, or until the loan is fully repaid, based on your credit card or debit card sales.
These rates are typically higher than the interest rates on other forms of financing, but merchant cash advances are quicker to obtain and easier to qualify for than other forms of credit. This means they can be a good option for businesses that primarily make credit card sales, especially if they can’t qualify for other financing options.
With invoice factoring, businesses can sell their unpaid invoices to an invoice factoring company and receive up to 90% or more of the uncollected total. The invoice factoring company turns a profit by collecting payments for the invoices and keeping the difference. However, if a client fails to pay a disputed invoice, the invoice factoring company may require the business to repay the advance.
If your business relies on invoices for cash flow, this option can help you predict exactly when you’ll get paid.
One advantage of invoice factoring is that it doesn’t come with the same requirements as a business loan, so you can often get an advance on your unpaid invoices even if you have bad credit and no additional collateral.
How to compare payroll loans
When shopping around for a payroll loan, it’s a good idea to consider a few different factors, including:
Funding time
Since business owners often need payroll funds quickly, consider how fast the company is able to offer you financing.
Repayment method
Lines of credit, invoice factoring and merchant cash advances all handle repayment differently. Be sure to choose a method that works well for you.
Repayment term
Think about how long you have to repay the funds and choose a time horizon that works with your budget.
Interest rate or factor rate
Borrowing funds always comes at a cost, but some lenders are more expensive than others. Remember to shop around for the best rate.
If your business violates state payday requirements or other employee payment laws by failing to pay, you’ll be committing wage theft. While the consequences vary by state and other factors, you may need to:
- Pay your employees’ wages with interest or fixed additional fees.
- Pay other penalties or face criminal prosecution for violations of the Fair Labor Standards Act.
- Face IRS penalties, interest and even property liens for late payroll taxes.
- Face civil and criminal prosecution by the IRS for noncompliance with employment tax laws.
- Face private lawsuits brought by employees for back pay (plus attorney fees).
- Face private lawsuits from independent contractors for breach of contract and potentially pay double damages in some jurisdictions.
Note that you could be exempt from penalties and fines if your nonpayment is not found to be willful due to a “good faith legal justification.” But you’ll still be responsible for the employee wages owed and you may lose the trust of your employees in the meantime.
How to avoid payroll loans
Since payroll loans can be costly, it’s best to manage your business finances to avoid cash flow issues that might lead you to borrow. Follow best practices, including:
- Conduct a business cash flow analysis to better time your expenses.
- Maintain cash reserves to cover emergency expenses.
- Request immediate payment terms and use automatic billing options if possible.
- Follow up with customers and collect late-payment fees.
- Use a business credit card for short-term, recurring expenses.
- Forecast future cash flow to anticipate seasonal inconsistencies.
- Don’t pay your bills early if there’s no advantage, in case you need the capital.
If you’re still having cash flow issues, you may need to find ways to reduce your expenses or raise your prices. You may also need to evaluate your products and services and eliminate offerings that aren’t making money for your business. Identifying and correcting these issues may help you generate positive cash flow and reduce the likelihood that you may need to take out short-term financing in the future.
Alternatives to payroll loans
The alternatives available to you will depend on the amount you need and how quickly you need the funds to cover payroll, but you can explore the following options:
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Collect overdue bills
Review your accounts receivable, starting with the most overdue invoices, and reach out to customers or clients by phone to remind them. You may offer a payment plan if they can’t pay all at once. -
Offer discounts
If your business frequently faces cash flow issues, try offering your customers an early payment discount. The U.S. Chamber of Commerce notes this can provide a competitive edge and help with customer retention. -
Take out a personal loan
Some lenders allow borrowers to use personal loan funds for business expenses. Personal loans are often easier to qualify for than traditional business loans, but loan limits may be lower and you’ll be personally liable for repayment. -
Liquidate assets
Consider liquidating your investments to raise cash, especially if you can do so without penalty. You can also sell business equipment, land or vehicles. If those assets are essential to your operations, consider leasing them instead. -
Sell stocks or take on a partner
A public offering isn’t the only way to sell shares of ownership in your business — you can also use business crowdfunding, look for an angel investor or venture capital financing or start a partnership that may be mutually beneficial. -
Research grants and special financing
Check whether you’re eligible for any business grants, which don’t need to be repaid, or special loan programs. You’re more likely to find opportunities if your business innovates, benefits the public or is a woman- or minority-owned business.
Our methodology: How we chose the best payroll loans
We looked at over 30 payroll loan lenders to come up with the seven best picks. Here’s a closer look at the criteria we used to make our selections:
- Funding time: We prioritized lenders who were able to provide funding within two business days or less.
- Funding method: We tried to select lenders who offer various types of financing in order to allow business owners to select the method that works best with their business model.
- Interest rate: We weighted lenders more heavily if they advertise interest rates that are lower than competitors. We also factor in transparency around rates and fees.