Top Payroll Loan Providers: Comparing Rates, Terms, and Eligibility Requirements

Payroll is one of the most important expenses for any business. It’s also one of the largest. Unexpected expenses or unpaid invoices can make it challenging to have the working capital necessary to meet payroll obligations every payday. When cash flow is slow, it’s nonetheless imperative to ensure you cover payroll to keep your business running smoothly.

If you’re struggling to make payday, a payroll loan can be a major asset. There are many loan providers offering business lines of credit, short-term loans, and other financing solutions that can help you meet your payroll needs. We break down some of the best.

In this article:

• What types of small business loans can work as payroll loan
• Where to find the best payroll loans for small business.
• How to compare interest rates, loan terms, and eligibility requirements between payroll loan

What Is a Payroll Loan?

A payroll loan isn’t a specific type of loan. It just refers to how you use the money you get from a loan. There are several types of financing that could serve as a payroll loan, from short-term small business loans to a business line of credit. Each type of loan works a bit differently, and terms may vary between traditional lenders like banks or credit unions, and online lenders.

Some of the most common funding options that could be used as a payroll loan for small business include:

• Term loans: These conventional loan products provide a lump sum upfront deposit. You repay it over a set period with monthly payments based on an interest rate. These loans are available from most lenders, and online lenders tend to offer faster funding than traditional ones.
• Working capital loans: Many alternative lenders offer short-term loans to support your working capital needs, like payroll. With short repayment terms, you can get the payroll funding you need and get out of debt quickly. (Although short-term loans tend to have higher interest rates.)
• Business line of credit: With a line of credit, you’re approved for a maximum loan amount, but you only pay interest and fees on what you use. So, if you withdraw money to cover payroll or other expenses, you may pay an origination fee and must repay the borrowed amount, plus interest. With a revolving line of credit, you’ll have access to the full amount after you’ve repaid what you borrowed.
• Invoice factoring: An alternative form of funding in which you sell unpaid invoices to a factoring company, invoice factoring is a good way to get cash fast. The factoring company assumes responsibility for securing the invoice and keeps a portion for their service.
• SBA loans: Loans that are partially guaranteed by the S. Small Business Administration are lower risk to lenders and offer some of the most competitive interest rates and loan terms. There are several SBA loan programs that could function as payroll loans, including SBA 7(a) loans and SBA Microloans. However, these loans tend to have strict eligibility requirements and slow loan application processes, making them poor options if you need cash fast.

Ultimately, many types of loans can cover payroll expenses. Payroll loans aren’t a specific offering from lenders, they’re just loans that you use to manage your payroll costs.

How to Choose the Right Payroll Loan Provider

There are many lenders out there who are willing to loan payroll funding to your business. It’s up to you to determine the best option. Here are several considerations to keep in mind:

• Type of lender: Depending on your situation, you may want to explore traditional lenders, online lenders, or private funders like factoring companies or MCA providers. Traditional lenders tend to be the slowest but have the best interest rates. Online lenders offer faster funding and lower eligibility requirements than traditional banks. Private funders have the lowest eligibility requirements but will likely have the highest interest rates or total borrowing cost.
• Credit score: Your personal and business creditworthiness will inform what kind of funding you can pursue. Term loans or SBA loans typically require a strong credit history, annual revenue, and a certain amount of time in business. Invoice factoring or MCAs are good options for business owners with bad credit.
• Loan amount: If you’re just looking for payroll financing, you may not need to jump through the hoops of a term loan. But if you want a payroll loan that can be used to cover other business needs, too, then it’s worth spending more time exploring your loan options.
• Application process: Traditional lenders tend to have the most rigorous application processes. Online lenders, offer online applications and can issue an approval decision in just a few business days. MCA providers or invoice factoring companies could offer same-day funding after a very fast approval process.
• Customer service: A payroll loan may just be the tip of your business financing needs. Building a relationship with a lender is a great way to ensure your business has the support it needs for years to come. So, spend some time reading lender reviews with the Better Business Bureau (BBB) and sites like Trustpilot.
• Approval requirements: Many lenders have minimum credit scores and other requirements depending on the type of loan. Some bury these requirements and make them hard to find on their website. Reputable ones will be transparent about the qualifying factors and documentation required, so you don’t have to waste your time.

5 popular Payroll Loan Providers

The best type of payroll loan for your business will depend on your unique situation. If you need money very quickly to cover payroll, you may need to leverage an MCA or invoice factoring. Small business owners who need short-term financing for several business needs, including payroll, may have the time and flexibility to apply for a bank loan.

Here, we break down some of the top payroll loan providers that can provide short-term business loans and other financing options to help cover payroll.

Big Banks

National banks can offer a wide range of small business loan products, but they likely won’t offer the flexibility of smaller competitors and alternative lenders. They typically have standard products and strict eligibility requirements, making them more difficult partners for newer businesses or business owners with bad credit. Moreover, national banks tend to have long underwriting periods, which makes them less ideal for payroll loans if you need cash urgently. You may also have to make a down payment for loans or offer collateral to get the best interest rates.

Products offered: Secured and unsecured term loans, lines of credit

Interest rates: As low as 7% annual percentage rate (APR). However, this will vary depending on the big bank/regional bank etc.

Minimum credit score: 650-700

Minimum time in business: 6 months – 2 years

Minimum annual revenue: $50,000+ However, this will vary depending on the big bank/regional bank etc.

Regional Banks

Smaller banks and credit unions will likely offer many of the same financial products you can get from national banks. However, like big banks, they’ll typically have strict eligibility requirements and long approval processes that make them less ideal partners for payroll loans. Nonetheless, some regional banks may offer more competitive interest rates and flexible terms for small businesses.

Products offered: Secured and unsecured term loans, lines of credit. However, this will vary depending on the big bank/regional bank etc.

Interest rates: As low as 7% APR

Minimum credit score: 625-700

Minimum time in business: 6 months – 2 years

Minimum annual revenue: $50,000+

Payro

Payro specializes in payroll financing, with approval times as fast as two days and funding times of just 24 hours after that for qualified applicants. The service offers quick repayment windows of just one to four weeks, making it easier to cover payroll and then get out of debt fast.

Products offered: Unsecured loans

Interest rates: As low as 1.5% weekly

Minimum time in business: 2 years

Minimum annual revenue: $300,000

Paychex Funding Solutions

One of the nation’s leading payroll providers, Paychex, has its own payroll financing division. Working with Alterna Capital Solutions, Paychex Funding Solutions provides upfront capital via invoice factoring. Essentially, Paychex Funding Solutions pays you upfront for your business’s outstanding invoices, and then assumes the collection of those invoices. It’s offered to anyone, regardless of whether or not they are a Paychex payroll client, and can be a good fast funding solution, but at the cost of surrendering your invoices’ full value.

Products offered: Invoice factoring

Interest rates: Up to 90% advance rates

Qualifications: Dependent on business’s assets and outstanding invoice value

Biz2Credit

Selected by Business News Daily as the best lender for marketplace loans, Biz2Credit offers short-term loans and revenue-based financing solutions that adapt with businesses as they grow. With flexible loan terms, you can use funds as a payroll loan, emergency loan, or to invest in expansion. Revenue-based financing means you repay the funding as your business increases revenue, giving you relief when business is slow and paying off the loan faster when business picks up.

Products offered: Term loans, revenue-based financing

Minimum credit score: 650

Minimum time in business: 12 months

Minimum annual revenue: $250,000

Final Thoughts

Payroll loans for small business can help cover one of your business’s most important expenses. There are several types of funding options that can serve as payroll loans, and the right one for your business might not be the right one for someone else. We’ve shown you some of the top payroll loan providers here, but always do your due diligence to determine the type of loan you need and the lender you’d like to work with.

FAQs about payroll loans

When should you get a payroll loan?

If you’re dealing with an unexpected financial setback or you project that business will slow in the coming months, it’s a good idea to get a payroll loan. While you can get fast funding last minute, it’s better to be prepared. Applying for a payroll loan at least a few weeks before you have to run an at-risk payroll will give you greater financial flexibility.

Can any business loan be a payroll loan?

If you’re using the proceeds from a loan to cover payroll, it could be considered a payroll loan.

What happens if your business doesn’t make payroll?

Each state has employee payment laws requiring businesses to meet their payday obligations. Failure to do so once may not result in legal consequences, but it will upset your employees, potentially hurting morale and productivity. Multiple missed paydays may result in penalties like additional fees or criminal prosecution.

What are the best payroll loan providers?

There are many, many lenders on the market, both traditional and alternative. The best option for you ultimately comes down to who will offer you the best terms. But some of the top-rated business funding providers include Bank of America, Bluevine, and Biz2Credit.

What are some alternatives to payroll loans?

If you cannot qualify for a loan or get funding fast enough to cover payroll, you can try to collect unpaid invoices yourself, offer discounts to customers who pay early, liquidate assets, or take out a personal loan.

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