Best Payroll Loans
Compare top lenders to find the right funding for your business.
| Lender | User rating | Best for | Starting rate | Amount | Term | |
|---|---|---|---|---|---|---|
|
Same-day funding | 39.60% (APR) |
$6k – $200k |
12 – 24 months | ||
|
Recurring funding | 3.30% (monthly interest rate) |
$5k – $100k |
12 – 24 months | ||
|
Fluctuating revenues | 13.00% |
$5k – $1.5M |
Up to 24 months | ||
|
Unpaid invoices | 0.75% |
$30k – $5M |
Not specified | ||
|
Traditional banking | 8.50% | Starting at $10k | Starting at 12 months | ||
|
Startups | 4.66% | Up to $250k | 3 – 12 months | ||
|
High credit card sales | 11.00% |
$5k – $600k |
3 – 24 months |
Best payroll loan lenders: More details
Best for: Same-day funding – OnDeck
- Starting rate
- 39.60%
- Same-day funding available
- Transparent eligibility requirements
- Only requires a soft credit check, which doesn’t impact your credit score
- Higher starting interest rates
- Instant funding withdraws limited to $1,000 to $10,000 per day
- Funding not available in North Dakota
OnDeck is our top pick when it comes to same-day financing for payroll expenses. With its “Instant Funding” feature, borrowers can transfer line of credit funds directly into an eligible business checking account in as little as 30 minutes.
Plus, OnDeck’s streamlined application process only takes minutes to complete, with no hard credit checks — meaning your score won’t be impacted. While many banks don’t disclose their eligibility criteria, OnDeck spells out all requirements in advance, helping you know where you stand.
Still, borrowing from OnDeck isn’t cheap. Its advertised starting rate for a line of credit is 39.60% Minimum APR offered to at least 5% of customers (not the lowest rate offered) , which can add up over time. The company also limits 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, which means you’ll need to plan ahead for larger withdrawals to account for time to transfer.
Read our full OnDeck review.
In order to qualify, you’ll need to meet OnDeck’s criteria of:
- Minimum credit score: 625
- Minimum time in business: 12 months
- Minimum annual revenue: $100,000
In order to access instant funding for OnDeck’s line of credit, borrowers must 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: Recurring funding – Headway Capital
- Starting rate
- 3.30%
- Funding available as soon as the next business day after approval
- Interest rates starting as low as 3.30%
- No prepayment penalty
- May impose a 2% draw fee in some states
- Not available in all states
- Doesn’t disclose its credit score requirement
If you need extra funds for payroll on a regular basis, check out Headway Capital’s business line of credit. Similar to a credit card, you can borrow up to your credit limit as often as needed, make weekly or monthly payments against your cumulative balance and then borrow again.
Plus, with rates starting as low as 3.30%, borrowing may be fairly affordable — though your final rate will depend on your personal and business financial history.
Note that funding from Headway Capital isn’t available in Arkansas, Connecticut, Michigan, Montana, Nevada, North Dakota, Rhode Island, South Dakota or Vermont. In addition, there’s a 2% draw fee, unless you live in Colorado, Georgia, Indiana, New Jersey or Oklahoma, you won’t be subject to the draw fee.
Read our full Headway Capital review.
In order to qualify, you’ll need to meet Headway Capital’s criteria of:
- Minimum credit score: Not disclosed
- Minimum time in business: 6 months
- Minimum annual revenue: $50,000
Best for: Fluctuating revenues – Fora Financial
- Starting rate
- 13.00%
- High borrowing amounts up to $1,500,000
- Offers a discount for repaying your debt ahead of schedule
- Quick access to funds — within 24 hours
- Charges a factor rate, making it harder to estimate the cost of borrowing
- Charges a 3.00% origination fee
- Doesn’t help build your business credit score
Businesses with fluctuating revenue may want to consider Fora Financial’s revenue advance. Instead of a predictable repayment schedule, revenue advances charge a fixed percentage of your daily or weekly sales, meaning you’ll owe less when business is slow. As an added bonus, you can receive funds as quickly as 24 hours after approval and enjoy a discount by paying your advance off early.
Be aware that Fora Financial charges a sizable 3.00% origination fee on its advances. Since they advertise a factor rate rather than a simple interest rate, you’ll want to convert the fee in advance to better understand the total cost of borrowing.
Read our full Fora Financial review.
In order to qualify, you’ll need to meet Fora Financial’s criteria of:
- Minimum credit score: 570
- Minimum time in business: 6 months
- Minimum annual revenue: $240,000
Best for: Unpaid invoices – altLINE
- Starting rate
- 0.75%
- Can be easier to qualify for than traditional bank loans
- Fast funding — receive funds as quickly as the same day you apply
- Supported by an established banking institution
- Charges an origination fee
- Requires your customers to be creditworthy
- Files a UCC lien on your business
If your company is frustrated by waiting on unpaid invoices, altLINE may be a good choice. As an invoice factoring company, altLINE advances up to 90% of any unpaid invoices, then works to collect payment from your customers on your behalf. Once payment is received, altLINE will give you the remaining invoice amount, minus its fees.
Invoice factoring is a popular option for businesses looking for bad credit financing because your customers’ creditworthiness matters more than your own when qualifying for an advance. However, factoring can get expensive, especially considering altLINE charges origination fees as high as $500, on top of the traditional initial service fee.
Learn more about altLINE.
As an invoice factoring company, altLINE doesn’t impose the traditional minimum credit score, annual revenue and business history requirements you may see with a traditional bank. It will, however, run a background and credit check to look for financial felonies while reviewing your invoices to determine your customers’ credit quality.
Best for: Traditional banking – Bank of America
- Starting rate
- 8.50%
- A one-stop shop with a wide variety of business banking products
- Doesn’t require collateral
- Rate discounts available for Bank of America Preferred Rewards members
- Charges an annual fee (waived for the first year)
- Limited options for startups
- Need good credit to qualify
Companies wanting to streamline their business banking and payroll services may want to consider Bank of America. In addition to a wide range of business products, Bank of America offers an unsecured business line of credit (LOC) with no collateral required, plus an affordable starting interest rate of just 8.50% — making it a solid option for payroll financing.
However, this LOC is designed specifically for established businesses with decent annual revenues, excluding early stage startups or those with limited credit profiles. Plus, this product is subject to an annual review with a $150 renewal fee (waived the first year).
Read our full Bank of America review.
In order to qualify for the unsecured business line of credit, you’ll need to meet Bank of America’s criteria of:
- Minimum credit score: 700
- Minimum time in business: 24 months
- Minimum annual revenue: $100,000
Best for: Startups – Fundbox
- Starting rate
- 4.66%
- High customer service ratings
- Available in all states and many U.S. territories
- Only requires three months of business history to qualify
- May need to provide a personal guarantee
- Payments must be auto-debited from your account
- May receive a short repayment term
Startup businesses needing payroll financing may want to consider Fundbox. The company offers a line of credit of up to $250,000 with only a three-month business history requirement. As an added bonus, its starting interest rate of 4.66% for the 12-week repayment plan is pretty low compared to competitors, with funding available in all 50 states.
Note that Fundbox may require you to provide a personal guarantee, which means you’ll be personally responsible if the business fails to repay the debt. In addition, payments must be auto-debited from your business bank account on a weekly basis, unless you subscribe to Fundbox Plus. While some lenders offer same-day business financing, you may have to wait up to two business days to receive your Fundbox funds.
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: $30,000
Best for: High credit card sales – Credibly
- Starting rate
- 11.00%
- Same-day funding available
- Accepts credit scores as low as 500
- Only 6 months of business history required, making it suitable for newer businesses
- Higher annual revenue requirement of $180,000
- Factor rate makes it hard to calculate total borrowing costs
- May receive a short repayment term
If your business processes mostly credit card sales, Credibly’s merchant cash advance (MCA) could be a good solution for your payroll needs. An MCA lets you pay back what you’ve borrowed using a portion of your daily debit or credit card sales, which may explain why the company’s revenue requirements are on the higher side.
Beyond that, this type of financing is relatively easy to qualify for. Credibly requires just 6 months in business and a minimum credit score of 500, making it ideal for startups or low credit borrowers. While this type of financing typically costs more than a traditional business loan, you can’t beat the speed and convenience of same-day financing.
Read our full Credibly review.
In order to qualify for a merchant cash advance, you’ll need to meet Credibly’s criteria of:
- Minimum credit score: 500
- Minimum time in business: 6 months
- Minimum annual revenue: $180,000
What is a payroll loan?
Payroll loans are a type of short-term, small business financing used to help pay a company’s workers. For example, you can use a payroll loan to cover 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
Technically, there’s not an official “payroll loan” specifically designed for wages and salaries. Instead, you can use a variety of funding options to cover payroll-related expenses. Picking the best financing depends on how your business operates, as well as your typical cash flow.
Short-term business loans
Best for: Early-stage startups or low credit borrowers needing fast funding.
Short-term business loans provide a lump sum that you typically repay 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, with funds hitting your bank account as soon as the next day.
They may also come with higher interest rates, ranging from about 3% to 50% or higher. Make sure to compare the total cost of borrowing when shopping lenders.
Business line of credit
Best for: Businesses wanting an emergency stash for as-needed purchases or to cover cash flow during seasonal slowdowns.
Similar to a credit card, a business line of credit allows your company to borrow what it needs, when it needs it — only paying interest on withdrawn amounts. There are many benefits to opening lines of credit versus credit cards, such as accessing higher credit limits with lower interest rates. As you make payments, you can withdraw up to your credit limit again and again.
Terms typically range from 12 weeks to five years, with lenders often charging 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 options.
Merchant cash advance
Best for: Businesses with a high volume of credit card sales who can’t qualify for other financing options.
A merchant cash advance (MCA) is delivered as a lump sum, with payments based on a set percentage of your company’s future sales. MCA companies typically use a factor rate instead of standard interest, collecting daily or weekly payments over the course of three to 24 months, or until the loan is fully repaid.
Your final rate and term is based on your overall credit card or debit card sales, not your personal or business credit profile.
Invoice factoring
Best for: Businesses that need help covering payroll and other expenses when customers delay paying their invoices.
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 will then work to collect the payment from the customer and send you the remainder, minus a factoring fee. If a client fails to pay a disputed invoice, the invoice factoring company may require the business to repay the advance.
One advantage of invoice factoring is that it doesn’t come with the typical business loan requirements as traditional financing, 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, here are some essential factors to consider:
Funding time
Since business owners often need payroll funds quickly, consider how fast the company typically delivers funds.
Repayment method
Lines of credit, invoice factoring and merchant cash advances all handle repayment differently. Be sure to choose a method that works for your business.
Repayment term
Short repayment terms generally come with lower interest rates, but could be a strain on your budget, while long term loans offer more breathing room.
Interest rate or factor rate
Borrowing funds always comes at a cost, but some lenders charge more than others. Remember to shop around for the best rate and convert factor rates in advance to compare with competitors.
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 due to accidental oversight, according to the “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 focus on successfully managing your business finances to prevent cash flow issues when possible. Here are some tips to keep your business on track:
- 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 experiencing cash flow issues, you may need to find ways to reduce your expenses or raise your prices. You can evaluate your products and services, then consider eliminating offerings that don’t turn a profit. Identifying and correcting these issues may help boost positive cash flow and reduce the likelihood of needing short-term financing in the future.
Alternatives to payroll loans
While quick and convenient, payroll loans have some downsides and may not be the right solution for your business. Here are some alternative ways to get the funding your company needs.
-
Consider traditional financing
Boosting your personal credit and establishing business credit can help unlock additional finance options, such as SBA loans and working capital loans. While turnaround times can take up to 60 days or longer, traditional financing generally offers more favorable rates and flexible repayment terms. -
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 loans 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 small business grants, which typically 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
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.