Business Funding for Payroll
Business funding for payroll when a receivable runs late.
Who should read this: owners with a payroll date coming up and less in the account than the run needs.
Why is payroll a harder use than inventory?
Payroll is harder because it doesn't come back as a sale. Inventory turns into revenue when it sells. Wages keep the lights on, which matters, but the dollars themselves are gone. The advance is really covering whatever receivable is late, so the question is when that receivable lands.
If the shortfall comes from a slow season rather than one late invoice, Cash flow covers it, and an emergency fix is a Repairs file. Other reasons owners take an advance are on the Uses hub.
A payroll week with a daily debit
A payroll week with a daily debit carries both amounts at once. In a business that runs $18,000 of biweekly payroll and pays $400 per business day on an advance, the payroll week needs $20,000 in the account across five days, and the off week still needs $2,000. We lay that out for owners with the actual dates from their statements.
| Week | Payroll | Advance debits (5 days) | Total out |
|---|---|---|---|
| Payroll week | $18,000 | $2,000 | $20,000 |
| Off week | $0 | $2,000 | $2,000 |
These figures are an example.
We're not a funder.
We don't fund deals ourselves. We shop yours with funders who do, so you see more than one offer.
Only funders that fit.
Your file goes to funders that work with your industry and your deal size. Nobody else sees it.
You make the call.
Every offer comes to you in writing. Nothing happens until you pick one.
- What it costs to apply
- Nothing. Applying costs you nothing, and Afterfirst MCA charges you no fee.
- Credit
- Ask us how each funder checks credit before you agree to anything.
- Speed
- We call you back and talk with you before your file goes to any funder.
- Offers
- Every offer shows the total payback, the payment amount, how often it comes out, and the term.
Planning business funding for payroll around a fixed daily debit
You plan payroll around a fixed daily debit by mapping both onto the same calendar and checking the balance on payroll day. The debit doesn't pause for payroll, so the week has to carry both.
Four weeks of deposits, debits and pay runs
Write out each business day for the next four weeks with expected deposits, the advance debit and the payroll run. The thinnest balance in that stretch is the number that matters.
Payroll and rent in the same week
When payroll lands on the first and rent lands the same week, the early days of the month are the tightest. The debit adds to that pressure every day.
Asking to shift debit timing
Some funders will change debit timing or switch to weekly debits on request. Ask in writing before the contract is signed, since changes later are harder.
Weekly debits on a biweekly payroll
A weekly debit placed on the off week of a biweekly payroll keeps the two apart. Ask whether the funder can set the debit day.
Processors that debit before payday
Payroll processors often payments funds a day or two before payday. Put the processor's payments date on the calendar, rather than the payday itself.
What should an owner confirm before using an advance for wages?
An owner should confirm three things before signing:
An owner already carrying an advance is looking at a Second position, and When MCA payments are too high is worth reading before a second daily debit lands in payroll week.
- The receivable that will refill the account is real, documented and dated.
- Payroll taxes are current, because a tax lien changes every conversation with a funder.
- The next two payroll runs are covered with the new payments running, in addition to this one.
Payroll questions
Do funders care that an advance is being used for payroll?
Funders ask what the money is for, and payroll is a common answer. What they read closely is whether the account recovers after the payroll run. A payroll use tied to a known receivable reads better than one with no end in sight.
What happens if payroll and the advance debit land on one date?
Both debits draw on the same balance, and if the account is short one can bounce, leading to returned-item fees and possible default under the advance contract. Some owners ask the funder to shift debit days away from payroll. That request needs to be made in writing.
Are unpaid payroll taxes a problem for a merchant cash advance?
Unpaid payroll taxes are a serious issue because the government can file a lien with priority over other creditors. Many funders will ask about tax liens and payment plans. Get current or on a documented plan before applying.
Sources
- The IRS page on Depositing and reporting employment taxes says employers deposit withheld income tax and both shares of Social Security and Medicare taxes on a monthly or semiweekly schedule. Because of that, business funding for payroll has to cover the tax deposit as well as net wages.
Afterfirst is not a funder; all offers are subject to funder underwriting.
Cost, credit, speed and stacking
Cost
Credit
Speed
Stacking
Send one file.
See what fits.
Call 877-FUND-654 with questions.