Payroll loans for small business are usually one of two products: a line of credit you draw on payday and pay down when your invoices clear, or revenue-based financing that puts a lump sum in your account, typically within one to two business days of choosing an offer, and is repaid with a set weekly or daily payment. Both are built for the same problem, which is wages that come due before customers pay. Through Today Capital Group, lines of credit go up to $2,000,000 and revenue-based financing runs from $5,000 to $2,000,000, and one application shows you offers for both.
Why payroll gaps happen to profitable businesses
A business can be profitable and still come up short on payday when the money it is owed arrives after the wages are due. In the Federal Reserve's 2025 Report on Employer Firms, 56% of small employers named paying operating expenses as a financial challenge and 51% named uneven cash flows. Among firms that sought financing, meeting operating expenses was the most common reason, also at 56%.
Three common patterns open these gaps.
- Receivables lag behind payroll. Staff are paid every week or two, while customers on net-30 or net-60 terms pay a month or two after the work is done. A firm that bills $45,000 a month on net-60 can run six biweekly payrolls before the first payment lands, which is the example in our post on financing for professional services firms.
- Seasonality moves revenue but not wages. A landscaper, a retailer or a restaurant keeps a core crew on payroll through the quiet months, and some businesses add staff before the busy season starts, so wages go up weeks before sales do.
- Growth comes before revenue. A new contract, a second location or a large order means hiring and training people first and getting paid for their work later. The faster a business grows, the deeper this gap gets.
Our guide to working capital loans walks through these gaps in more detail. The chart below shows the shape of one.
What the law expects on payday
The rules on when wages must be paid come from both federal and state law. This section describes them as information, and your state labor department or an employment attorney can tell you how they apply to your business.
Under the federal Fair Labor Standards Act, the Department of Labor's interpretive rule on overtime says that overtime earned in a workweek must generally be paid on the regular payday for the period in which that workweek ends (29 CFR 778.106). In practice, that makes the regular payday the date to plan around.
States set how often you must pay and how soon after a pay period ends. California is a useful example of how specific these rules get. According to the state's Labor Commissioner's Office, most wages there must be paid at least twice each calendar month on regular paydays set in advance, and weekly or biweekly payrolls must be paid within seven calendar days of the end of the pay period. Other states have their own frequencies and deadlines, so check the rules where your employees work before changing a payday.
Payroll tax deposits run on their own schedule
Payroll also includes the federal tax deposit, which covers the income tax you withheld plus both the employee and employer shares of Social Security and Medicare, according to the IRS page on depositing and reporting employment taxes. That money has to be in your account on the deposit date, which may be a different day from payday.
IRS Publication 15 sets two deposit schedules, and which one you follow depends on how much employment tax you reported in a lookback period, not on how often you pay staff.
- If you reported $50,000 or less in the lookback period, you are a monthly depositor, and taxes on wages paid during a month are due by the 15th of the following month. New employers are monthly depositors for their first calendar year.
- If you reported more than $50,000, you are a semiweekly depositor. Taxes on wages paid Wednesday through Friday are due the following Wednesday, and taxes on wages paid Saturday through Tuesday are due the following Friday.
- If you build up $100,000 or more in taxes on any day during a deposit period, the deposit is due the next business day, whichever schedule you are on.
When you plan for a short payroll, plan for the deposit too. A gap that covers net pay but leaves the tax deposit short has only moved the problem a few days.
Payroll financing options that fit a short gap
The right payroll financing depends on whether the gap repeats or happens once, and on how soon the money you are waiting for will arrive.
A line of credit drawn for payroll
A business line of credit fits a gap that comes back every month or every season. You draw what payday needs, and when customer payments clear you pay the line down, which frees the same room for the next payroll. Through us, lines go up to $2,000,000, offers often come back within a day, and you repay weekly or monthly on what you have drawn rather than on the full limit. Some programs discount early payoff, which suits a business that expects to clear each draw within a few weeks.
For example, a commercial cleaning company runs a $30,000 payroll every two weeks and bills clients on net-45 terms. It draws $30,000 on a Thursday, pays its people Friday, and pays the draw back three weeks later when a client invoice clears. The cost is the fee or interest on $30,000 for those three weeks, set by the program, rather than on the whole limit. Our guide to the business line of credit covers how draws, limits and renewals work.
Revenue-based financing for a one-off gap
Revenue-based financing fits a single gap that needs cash quickly, such as a payroll that lands the week before a large customer payment, or the first two payrolls for a new contract. It is a merchant cash advance. The funder buys a set amount of your future sales for a lump sum now, sizes the offer on your usual revenue, and collects a set daily or weekly payment until the agreed total is paid. Decisions rest mainly on four months of business bank statements rather than collateral, and most applicants are funded within one to two business days of choosing an offer.
Here is a worked example with illustrative numbers. A business with usual deposits of about $20,500 a week needs $20,000 to cover payroll. It accepts an advance of $20,000 at a factor rate of 1.20.
- The total payback is $20,000 times 1.20, which is $24,000.
- The cost in dollars is $24,000 minus $20,000, which is $4,000, or 20 cents for each dollar advanced.
- The payment is a set $2,000 a week for 12 weeks, about a tenth of a usual week's deposits.
- If the offer also withholds a fee at funding, subtract that fee from the $20,000 to see what reaches the account.
The factor rate and term in a real offer depend on the business and the funder. Our explainer on factor rates shows how to read them.
Invoice factoring, which we do not arrange
Much of what is sold as payroll funding, especially to staffing agencies, is invoice factoring. A factoring company buys your unpaid invoices, advances most of their value right away and pays you the rest, minus its fee, once your customer pays. Customers often pay the factor directly. It suits a business whose payroll is tied closely to invoices owed by creditworthy customers. Today Capital Group does not arrange factoring, so if it fits your business, you would find it with a factoring company.
Talking to your payroll provider about timing
Before you borrow, call your payroll provider. Payroll providers set a cutoff for approving a run before payday so the direct deposits can go out on time. Ask what yours is, whether a later cutoff or a wire option exists, when it debits your account for net pay and when it debits for tax deposits, and what happens if a debit fails. If you are thinking about moving from weekly to biweekly pay, ask the provider how to give notice, and check your state's frequency rules first.
A payroll service handles the filing, but the responsibility for the taxes stays with you. The IRS lists responsible people within a payroll service's client business among those who can owe the trust fund recovery penalty described below.
What not to do when payroll is short
When cash is tight on payday, some owners pay staff and hold back the tax deposit, planning to catch up later. That choice brings penalties, and some of them can follow the owner personally.
Publication 15 sets the failure-to-deposit penalty at 2% of the amount for deposits 1 to 5 days late, 5% for 6 to 15 days late, 10% for 16 or more days late, and 15% for amounts still unpaid more than 10 days after the first IRS notice. Each percentage applies to the late deposit itself.
The bigger risk is personal. Income tax and the employee share of Social Security and Medicare are trust fund taxes, money you hold for your employees. If they go unpaid and the business cannot pay them, the IRS can assess the trust fund recovery penalty, equal to 100% of the unpaid trust fund tax, against any responsible person who willfully failed to pay. That can include owners, officers and anyone who signs checks or decides which bills get paid. The IRS says that using available funds to pay other creditors when the business cannot pay its employment taxes is an indication of willfulness, and once the penalty is assessed it can file a lien or levy against personal assets.
A few other habits make a gap harder to close.
- Waiting until the day before payroll to apply leaves little room. Most applicants are funded within one to two business days of choosing an offer, and some the same day, which our guide to same-day business funding explains along with bank cutoff times.
- Paying staff after the regular payday can break the state payday rules described above, so check them before you move a payday, even by a day.
- Taking more than the gap needs raises the cost. Size the advance or the draw to the shortfall, including the tax deposit, and check that the payment fits a usual week's deposits.
How to plan for the next payroll gap
Arrange payroll funding a few weeks before you need it, starting with a short plan.
- List every payday and every tax deposit date for the next 13 weeks, with the amount of each.
- Next to those, list the customer payments you expect and the date each one is due, then mark the weeks where the running balance drops below the cushion you want to keep.
- Open a line of credit while the books look healthy, so the room is there when a slow-paying customer or a busy-season hire opens a gap.
- Move the tax portion of each payroll into a separate account on payday, so the deposit is never the money that covers something else.
- Send invoices the day work is finished and follow up on anything past its terms, since every day a customer pays sooner shortens the gap.
How to apply for payroll funding through Today Capital Group
The application is a short form plus four months of business bank statements, which you can upload or share by connecting your bank read-only. Getting matched does not need a hard credit pull, since most funders prequalify from bank statements and a soft pull, and you will know before any funder runs a hard pull in final underwriting. Your file goes to the funders in our network, and the offers that come back, lines of credit and revenue-based financing alike, are laid out side by side so you can compare the payment, the total payback and the term before you sign anything. There is nothing to pay to apply or to see offers.
The funders we work with generally look for about a year in business and about $20,000 a month in deposits. If you are not there yet, apply anyway. Some funders work with newer or smaller businesses, and we will tell you what is realistic. If payroll is a few days away, call us at (818) 351-0225 after you apply so we can move your file quickly.
Questions about payroll loans for small business
Can I get a loan to cover payroll?
Yes, and the most common ways to cover payroll are a business line of credit, which you draw on payday and pay down as invoices clear, and revenue-based financing, which delivers a lump sum and is repaid with a set daily or weekly payment. Through Today Capital Group, lines go up to $2,000,000 and revenue-based financing runs from $5,000 to $2,000,000, with offers based mainly on four months of business bank statements.
How do you get payroll funding?
You apply with a short form and four months of business bank statements, funders review your deposits, and you choose from the offers that come back. A line of credit suits a gap that repeats, revenue-based financing suits a one-off shortfall, and invoice factoring, which we do not arrange, is offered by factoring companies to businesses with unpaid invoices from creditworthy customers.
How fast can I get money for payroll?
Most applicants are funded within one to two business days of choosing an offer, and some the same day, while bank and SBA-equivalent loans take weeks. Apply several days before payday and before your payroll provider's cutoff so there is time to compare offers.
Is a line of credit or an advance better for payroll?
A line of credit fits payroll gaps that come back every month or season, because you repay what you draw and reuse the room for the next payday. Revenue-based financing fits a single gap that needs cash quickly, such as one payroll before a large customer payment, and its cost is fixed in dollars from the start.
What happens if I pay payroll taxes late?
The IRS charges a failure-to-deposit penalty of 2% to 15% of the late deposit depending on how late it is. If trust fund taxes go unpaid, the IRS can also assess the trust fund recovery penalty, equal to 100% of the unpaid trust fund tax, personally against owners and others responsible for paying it.
Do I need good credit for payroll financing?
Credit matters more to some funders than others, and a low score narrows the options rather than ending them. Revenue-based financing is decided mainly on the deposits in your business bank statements, and getting matched does not need a hard credit pull.
