6 Best Payroll Loans for Small Businesses 2019

Payroll loans are short-term loans that small businesses can use for quick payroll funding. Below we evaluate the top payroll loan options and provide our recommendations. We also give you the information you need to determine if a term loan, a line of credit, or invoice factoring is right for you.

Top 6 Payroll Loans 2019

What a Payroll Loan Is

Working capital loans are critical for businesses needing to smooth out their cash flows to meet payroll obligations. Payroll loans for small businesses include any financing used to cover employee wages by a business. Business owners sometimes confuse them with payday loans, which lenders make to individuals as an advance on their salary.

There are several payroll funding options available. The most common option is to borrow with a business line of credit or a short-term loan that requires weekly or monthly payments. Another option is invoice factoring, which involves selling outstanding invoices at a discount and is sometimes referred to as payroll or staffing factoring.

How We Evaluated the Best Payroll Loans

The best payroll loan lenders provide borrowers with financing options at a low cost. Because businesses often need urgent payroll funding, we also took under consideration the speed of funding. Businesses that are seeking payroll loans online require options they can qualify for and receive fair terms on their loans.

The criteria we used to evaluate the best payroll loans for small business include:

• Loan size: How large a loan business owners might qualify for with each provider.
• Cost: How much payroll financing will cost in terms of interest, fees, and APR.
• Minimum qualifications: What it takes to qualify for a payroll loan, including such things as a personal credit score, time in business, annual revenue threshold, and more.
• Speed of funding: How long businesses need to wait for funds after approval. It is important because payroll shortcomings are not always predictable well in advance.
• Terms: The terms of the loan, including repayment frequency and the time business owners can get to repay the funding.
• Customer reviews: The reviews left by former and current customers on the web, which reflect the benefits and potential shortcomings of each lender.

Based on these criteria, we believe Fundbox is the best payroll funding option available for businesses. It offers next-day funding up to $100,000 on a line of credit based on accounts receivable. Fundbox has no minimum credit score requirement and charges low starting rates on a weekly basis, giving business owners the option of repaying a draw early.

Fundbox: Best Overall Payroll Loan

Fundbox offers a line of credit based on the value of outstanding invoices and is the best payroll funding option for small businesses. With funding available in 24 hours, fees starting at 4.66%, and loan values of up to $100,000, it is the only provider besides National Funding with no minimum credit score required.

Fundbox Costs

Fundbox line of credit costs includes:

• Total fee: 4.66% of the draw amount for 12 weeks and 8.99% of the draw amount for 24 weeks
• Effective weekly fee: 0.5% to 0.7%
• Estimated APR: 10% to 79%
• Origination fee: None

Fundbox charges a weekly fee known as the discount rate. With Fundbox, businesses can decrease the overall cost of their loan by paying it early, unlike many other payroll lenders on this list. Every day that a $10,000 loan is outstanding with Fundbox, it will charge daily interest between $2.70 and $21.65 until the business repays the loan.

Fundbox Terms

Fundbox line of credit terms include:

• Loan amount: $1,000 to $100,000
• Repayment term: 12 or 24 weeks
• Repayment schedule: Weekly
• Collateral: Unsecured with a potential blanket UCC filing
• Personal guarantee: Typically not required, but possible
• Speed to funding: 10 minutes to apply with a decision in as quickly as three minutes; ongoing funding within 24 hours

Businesses can use Fundbox’s line of credit as a short-term payroll loan with maximum terms of 24 weeks. This is shorter-term than other providers, covering three to six months. The weekly repayment schedule is less flexible than some other options but is comparable to other line of credit providers.

Fundbox Qualifications

Fundbox line of credit qualifications include:

• Credit score: No minimum
• Minimum annual revenue: No minimum, but ideally at least $50,000
• Time in business: At least six months

Fundbox’s requirements are the lowest on our list of payroll funding options. Businesses can qualify if they have been in operation for six or more months and have outstanding accounts receivable due in less than 90 days. Its minimum qualifications are above average when compared to other accounts receivable financing companies.

What Fundbox Is Missing

Fundbox is the best overall option for payroll funding because it’s a fast business loan that offers flexible draws and low minimum qualifications. However, business owners can only get up to $100,000 with terms of 24 weeks. Business owners needing a large lump sum advance with longer repayment terms should consider OnDeck instead.

Fundbox Reviews

We determined Fundbox reviews are positive overall and came from users who said the company’s helpful customer service team made the process easy. Critical Fundbox reviews are from users who wished they could change the repayment terms to longer periods after starting the loan.

OnDeck: Best Payroll Loan for Prime Borrowers

OnDeck offers short-term loans up to $500,000 to help meet payroll funding needs. Its loans have terms up to three years and starting rates of 9%, making it potentially the most affordable option on our list for prime borrowers. It also offers a line of credit up to $100,000 to fill any gaps in financing.

OnDeck Costs

OnDeck payroll loan costs include:

• Starting interest rates: As low as 9% interest for term loans up to 12 months
• Expected APR: 10% to 100%
• Origination fee: 0% to 5%

The OnDeck term loan has a rate as low as 9%, which makes it the best-priced payroll loan on our list. To better understand what the APR means for a business, consider that for every $10,000 borrowed, OnDeck charges between $2.70 and $27.40 in interest per day while the loan is outstanding.

OnDeck Terms

OnDeck payroll loan terms include:

• Loan amount: $5,000 to $500,000
• Repayment term: Three to 36 months
• Repayment schedule: Daily or weekly
• Collateral: Blanket UCC filing on business assets
• Personal guarantee: Required
• Time to funding: One to three business days

OnDeck Capital offers payroll loans that range from three to 36 months. This high range of flexibility compares well to other options, especially if a business’ payroll financing needs are unpredictable. However, when comparing OnDeck to Kabbage, another payroll lender, borrowers will notice that OnDeck lacks a monthly payment option.

OnDeck Qualifications

OnDeck payroll loan qualifications include:

• Credit score: At least 600 (check your score for free)
• Time in business: At least one year
• Annual revenue: At least $100,000

OnDeck requires a minimum credit score of 600 or higher to qualify for its loans. Businesses also need to be operational for at least a year and have over $100,000 in annual revenue to meet OnDeck’s minimum qualifications. Its requirements compare favorably to other lenders on our list.

Additional Financing Provided by OnDeck

OnDeck also offers a line of credit to complement its term loan, and business owners can qualify for both. However, the line of credit has higher minimum qualifications. Like its term loan, the best rates are available for prime borrowers, starting at 13.99% APR. However, repayment terms are shorter at six months, with weekly payments and loan limits of $100,000.

OnDeck line of credit rates, terms, and qualifications include:

• Starting interest rates: As low as 13.99% APR
• Expected APR: 13.99% to 63.2%
• Loan amount: Up to $100,000
• Repayment term and schedule: Six months or a year with weekly payments
• Credit score: At least 600
• Time in business: At least one year
• Annual revenue: At least $100,000
• Time to funding: One to three business days

OnDeck also provides average cost information for its line of credit. The average weighted APR for its line of credit for the quarter ending June 30, 2018 is 32.6%. This means that a draw of $10,000 will cost between $3.80 and $17.30 per day in interest.

What OnDeck Is Missing

Borrowers needing a term loan with long repayment terms and the lowest rates for prime borrowers will be happy with OnDeck. However, there is no benefit to paying off the loan early for business owners. Another lender that offers a prepayment discount and large funding amounts is Kabbage.

OnDeck Reviews

Users leave positive reviews of OnDeck on our site and around the web. OnDeck positive reviews said its professional and friendly customer service made the loan process quick and easy. Users who gave critical OnDeck reviews said its fees were costly compared to other similar companies.

Kabbage: Best Payroll Loan With Monthly Payments

Kabbage is best for businesses needing monthly payments on a payroll loan up to $250,000. It is the only provider we evaluated that offers monthly repayment on six, 12, and 18-month lines of credit. It charges comparable fixed rates starting at 1.5% per month and has lower minimum annual revenue requirements than OnDeck.

Kabbage Costs

Kabbage line of credit costs include:

• Interest rates: 1.5% to 10% per month (average fee is 4% for a six-month term and 3% for a 12-month term)
• Estimated APR: 24% to 99%
• Origination fee: None

With each draw considered an independent loan, Kabbage offers borrowers a great deal of flexibility in how much and when they borrow funds. Similar to Fundbox, it also allows businesses to repay the loan early and save money on the remaining monthly fees. For every $10,000 a business draws, Kabbage charges a daily interest payment between $6.55 and $27.10 while the loan is outstanding.

Kabbage Terms

Kabbage line of credit terms include:

• Line of credit amount: $2,000 to $250,000
• Draw amount: $500 to $250,000, or any size with the Kabbage Card
• Repayment term: Six, 12, or 18 months
• Repayment schedule: Monthly
• Collateral: Blanket UCC filing on business assets
• Personal guarantee: Required
• Speed to funding: As soon as one business day

Kabbage’s line of credit is available up to $250,000, with each draw representing a new loan. Kabbage is the only line of credit provider we evaluated that offers monthly repayment regardless of the loan term. Its low minimum withdrawals make it a convenient payroll loan.

Kabbage Qualifications

Kabbage line of credit qualifications include:

• Credit score: At least 550 (check your score for free)
• Minimum annual revenue: At least $50,000 (or at least $4,200 per month for the past three months)
• Time in business: At least one year

Although qualifying for a Kabbage line of credit can be more difficult than Fundbox, the flexible loan amounts and high maximum makes it a strong payroll financing option. It has a lower annual revenue requirement than BlueVine and OnDeck, with a higher personal credit score of at least 550. The minimum credit score requirement may be a hurdle for some businesses needing a business loan with bad credit.

What Kabbage Is Missing

Kabbage is the only option on our list that offers monthly payments on a line of credit for business owners seeking payroll funding. However, it has higher minimum requirements than Fundbox and offers half as much funding as OnDeck does. Business owners needing a large amount of funding or multiple loan products should look into BlueVine instead.

Kabbage Reviews

Kabbage reviews are positive overall on our site and around the web. Users who gave positive reviews said its customer service provided clear explanations. Although some Kabbage reviews complained about high-interest rates and short repayment terms, it discloses its rates and terms upfront.

BlueVine: Best Payroll Loan for Businesses With Outstanding Invoices

BlueVine’s invoice factoring is a good option for businesses needing up to $5 million with rates ranging from 0.25% to 1.35% per week. To qualify, business owners need a personal credit score of at least 530 and outstanding business-to-business (B2B) or business-to-government (B2G) invoices. BlueVine also offers a line of credit and term loan up to $250,000.

BlueVine Costs

BlueVine invoice factoring costs include:

• Discount rate: 0.25% to 1.35% per week
• Estimated APR: 13% to 70%
• Origination fees: None

BlueVine’s rates are slightly lower than other providers, especially considering its higher borrowing limits. This is because BlueVine uses the invoices as collateral. Based on our estimates on an invoice for $10,000, BlueVine charges $3.60 and $19.20 for each day that the invoice is outstanding.

BlueVine Terms

BlueVine invoice factoring terms include:

• Loan amount: $5,000 to $5 million per month
• Advance rate: 85% to 90% on invoices with face values of $500 or higher to B2B customers
• Repayment term and schedule: Advances are repaid as customers pay their invoices
• Personal guarantee: Required
• Initial approval speed: 10 minutes
• Time to funding: One to three business days

BlueVine offers the highest limit we evaluated—$5 million for its invoice factoring facility. Because of how invoice factoring works, businesses will not make payments to BlueVine. Instead, BlueVine will collect the outstanding invoices from a business’ customers to repay the outstanding loan.

BlueVine Qualifications

BlueVine invoice factoring qualifications include:

• Credit score: At least 530 (check your score for free)
• Time in business: At least three months
• Annual revenue: At least $100,000

To qualify for invoice factoring with BlueVine, a business owner’s credit score must be at least 530, which is in line with other invoice factoring providers. Business owners will also need to meet a $100,000 annual revenue requirement, which is higher than some other providers like Fundbox. However, BlueVine will consider businesses that have three or more months of operations, which is the lowest time in business requirement on our list.

Additional Financing Provided by BlueVine

Besides invoice factoring, BlueVine also offers a line of credit and a term loan that companies can qualify for. The minimum qualifications are higher, including a minimum credit score of 600 and at least six months in business. Businesses can take advantage of multiple financing options to solve working capital issues and payroll funding shortages.

BlueVine business line of credit costs, terms, and qualifications include:

• Interest rates: 4.8% to 50% simple interest, which excludes fees and compounding
• Estimated APR: 18% to 86%
• Loan amount: $5,000 to $250,000
• Repayment term and schedule: Six or 12 months, with weekly or monthly payments
• Credit score: At least 600
• Time in business: At least six months
• Annual revenue: At least $100,000
• Speed to funding: One to three days

BlueVine business loan costs, terms, and qualifications include:

• Starting interest rates: 4.8% to 47.1%
• Estimated APR: 18.2% to 78%
• Loan amount: $5,000 to $250,000
• Repayment term and schedule: Six or 12 months, with weekly payments
• Credit score: At least 600
• Time in business: At least six months
• Annual revenue: At least $100,000
• Speed to funding: One to three days

The sales team at BlueVine provided us with the simple interest rate that borrowers may pay on its line of credit: 4.8% to 50%. The estimated APR we calculated, 18% to 86%, will typically mean that on $10,000 drawn from the line of credit, a business will pay between $4.90 and $23.60 per day in interest.

What BlueVine Is Missing

Business owners with outstanding business and government invoices can receive up to $5 million in funding to cover payroll expenses on major projects with BlueVine. But its qualifications are more restrictive than other invoice factoring companies. Businesses needing invoice financing can work with Fundbox instead.

BlueVine Reviews

We considered BlueVine reviews by users from around the web and determined it has positive ratings. Positive BlueVine reviews came from customers who noted its helpful customer support team. Critical BlueVine reviews came from business owners who did not receive approval for funding from BlueVine.

LoanBuilder: Best Customizable Payroll Loan Option

LoanBuilder offers a payroll loan for companies wanting the option to customize their loan terms. It issues loans up to $500,000 with a starting rate of 2.9% and weekly payments to small businesses. Its minimum score requirement of 550 and a one-year term make it a comparable alternative to OnDeck.

LoanBuilder Costs

LoanBuilder payroll funding costs include:

• Starting interest rates: 2.9% to 18.72%
• Estimated APR: 12% to 136%
• Origination fees: None

LoanBuilder does not offer early repayment benefits like Fundbox, which means business owners need to select the right loan term because they are paying the whole fee no matter when a business repays it. Based on available information, we estimated its APR ranges from 12% to 136%. This means that a business will pay daily interest between $3.30 and $37.30 for every $10,000 it borrows.

LoanBuilder Terms

LoanBuilder payroll funding terms include:

• Loan amount: $5,000 to $500,000
• Repayment term: 13 to 52 weeks
• Repayment schedule: Weekly
• Collateral: Blanket UCC filing on business assets
• Personal guarantee: Required
• Speed to funding: 10 minutes to complete its online application with approval in days; ongoing funding within 24 hours of a request

LoanBuilder’s greatest advantage over other payroll loans we evaluated is the flexibility it offers in terms and loan amounts to its borrowers. By selecting the repayment term, the borrower can control costs and borrow for a set time that is sustainable for the business. This gives borrowers greater flexibility than other providers, like OnDeck, which has more rigid terms for its loans.

LoanBuilder Qualifications

LoanBuilder payroll funding qualifications include:

• Credit score: At least 550 (check your score for free)
• Minimum annual revenue: At least $42,000
• Time in business: At least nine months

With a nine-month active time in business and a credit score of 550 or higher, qualifying for LoanBuilder is comparable to the other payroll loan options we discussed so far. The additional requirement for annual gross business revenue is lower than other payroll loans, but expect these requirements to increase for longer terms and larger loan amounts.

What LoanBuilder Is Missing

With LoanBuilder, borrowers can qualify to borrow up to $500,000 and select their own repayment terms. However, there is no prepayment benefit and the maximum term of the payroll funding is only 52 weeks. Business owners who can meet higher qualifications should apply with OnDeck instead.

LoanBuilder Reviews

We compiled LoanBuilder user reviews from around the web and determined LoanBuilder has positive ratings. Customers who provided positive LoanBuilder reviews said its process was quick and efficient. Customers who provided negative LoanBuilder reviews said the cost of the loan was too high.

National Funding: Best Payroll Loan for Businesses With Credit Card Receivables

National Funding’s merchant cash advance (MCA) payroll loan up to $250,000 is good for business owners with poor credit who accept a lot of credit card payments. Business owners repay a merchant cash advance from daily credit card settlements and is the most expensive payroll option we evaluated, with APRs potentially exceeding 100% because of low minimum requirements.

National Funding Costs

National Funding merchant cash advance costs include:

• Starting factor rate: 1.1 to 1.16 times the loan amount
• Estimated APR: 30% to 150%
• Origination fees: None

National Funding offers its merchant cash advance to high-risk borrowers unable to get access to payroll loans anywhere else. National Funding offsets this risk with a high factor rate charged by National Funding. Based on the estimated APR, businesses can expect a $10,000 MCA to cost between $8.20 and $41.10 in interest per day.

National Funding Terms

National Funding merchant cash advance terms include:

• Loan amount: Up to $250,000
• Repayment term and schedule: Up to 18 months with automatic deductions from credit card receivables
• Collateral: Unsecured (blanket UCC filing on business assets is likely)
• Personal guarantee: Likely required
• Speed to funding: Quick online application with approval as soon as the same day and funding in as quickly as 24 hours

National Funding payroll loans have high variability in the specific terms received by businesses. However, part of what National Funding offers is the relationship and future access to better-priced loan products as a business owner’s credit score improves.

National Funding Qualifications

National Funding merchant cash advance qualifications include:

• Credit score: No minimum requirement
• Time in business: At least one year
• Annual revenue: No requirement, but businesses must have monthly credit card transactions over $3,000
• Required documentation: Credit card statements for four months

National Funding requires no minimum credit score and one year of ongoing operations. In addition, applicants will have to provide a history of credit card processing to establish their ability to repay the loan. These terms are easier to meet than all providers except Fundbox, and are comparable to other MCA providers.

Additional Financing Provided by National Funding

Besides its MCA, National Funding also offers a term loan to its borrowers. Its term loan is available up to $500,000 with repayment terms up to a year. The starting rates are lower, and some borrowers start with a merchant cash advance and refinance with a term loan once their credit score improves.

The typical National Funding small business term loan costs, terms, and qualifications are:

• Interest rate: 8% starting rate
• Estimated APR: 10% to 136%
• Loan amounts: $5,000 to $500,000
• Repayment term and schedule: Three months to one year with daily or weekly payments
• Personal credit score: At least 500
• Annual revenue: At least $100,000
• Time to funding: As soon as the next business day

What National Funding Is Missing

Whether the reason is low credit or quick funding, business owners will find the National Funding fits their needs. However, an MCA is an expensive payroll funding option, and so the rates National Funding charges are a drawback. To transition to a more affordable loan from National Funding, business owners will need to improve their personal credit score.

National Funding Reviews

We determined that National Funding reviews are a mix of positive and negative feedback from users. Customers who gave positive reviews said the application process was quick and easy. Customers who gave negative National Funding reviews complained about high interest rates and additional charges.

Pros & Cons of Payroll Funding

Payroll funding offers small business owners an option to cover payroll expenses and avoid missing payments to employees. This can improve employee retention with short-term funding that is available quickly. However, business owners should make it a priority to address underlying issues and ensure that there is a sustainable plan in place for repayment.

Pros of Payroll Funding

Benefits of using payroll funding include:

• Increasing employee retention: Failing to pay employees causes employee turnover, which results in increased costs for hiring, onboarding, and training replacements. Accessing payroll funding to cover a temporary shortfall can prove cost-effective after considering other expenses.
• Matching a short-term need with a short-term solution: Most payroll funding gaps are short term in nature and are the result of a slow month or busy season. Getting a short-term financing solution can reduce the overall cost of financing for a business.
• Accessing funding on short notice: Although many businesses engage in planning and budgeting, unexpected expenses can cause a payroll funding gap. Waiting weeks for funding in such an event isn’t an option. In these cases, getting a payroll loan with next day funding is the best solution.

Cons of Payroll Funding

Drawbacks of using payroll funding include:

• Failing to solve a long-term issue: Larger underlying issues like poor cash flow or personnel management can cause payroll issues. Getting payroll funding only applies a patch to the problem, and it’s important for business owners to address underlying issues.
• Compounding existing working capital shortages: When a business is faced with short-term funding issues, payroll is one of the highest priorities. However, loan payments can strain cash flow and make it difficult to manage payments. Business owners should ensure that they have a plan for how to repay the payroll loan.

Alternatives to Short-term Payroll Loans

We have covered the best payroll loans for both short- and medium-term payroll financing. However, there are situations in which a business should consider long-term payroll financing, like an SBA loan. If applicants can’t qualify because their business has too much existing debt, getting debt relief may improve their odds of success.

Alternatives to short-term payroll loans include:

• SBA loans: Prime borrowers with financing needs that are not immediate should explore Small Business Administration (SBA) loans. There are different types of SBA loans available for long-term financing, working capital, and even commercial real estate.
• Debt relief: Business with too much short-term debt should refinance or consolidate their loans. If personal credit or outstanding debt have improved, owners may refinance their business loan at a better rate. They can also consolidate outstanding business loans to reduce the overall interest and monthly payments.

Bottom Line

In this guide, we covered the best online lenders for payroll loans available to small businesses needing payroll funding. When selecting a payroll loan provider, businesses should look for terms that match their needs at the lowest cost. Besides the options we covered, there are other creative payroll solutions available.

Businesses needing same-day funding to cover immediate payroll needs can apply for a payroll loan with Fundbox. Fundbox offers invoice financing on a line of credit up to $100,000 with repayment terms up to 24 weeks and no minimum credit score requirement. Its application is entirely online and applicants can complete it in 10 minutes.

Visit Fundbox