Which funding products does this apply to?

Business Line of Credit, Invoice Financing, Payroll Financing. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.

Is this specific to staffing?

It is written around how a staffing business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.

The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.

How do I know a figure here is right?

Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.

Are the examples real deals?

No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.

Why do you never say what a typical rate is?

Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.

Is this financial or legal advice?

No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.

Can I reuse this content?

Quote a paragraph with a link back. Do not republish whole articles.

Payroll funding or a line of credit: which covers payroll?

Should you fund payroll on a line of credit or a payroll-specific facility?

A line of credit is cheaper and more flexible right up until the week it is not available, which is the only week that matters for payroll.

By Find Me Funders research desk Updated 14 September 2026 1077 words 5 min read

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

Should I fund payroll on a line of credit or a payroll-specific facility?

A line of credit is usually the cheaper and less intrusive way to cover a payroll gap, and it is the right answer when the gap is occasional and your availability comfortably exceeds a pay run. A payroll-specific facility costs more but ties funding to receivables you generate every week, so availability grows with the payroll it is covering. The deciding question is not price. It is whether the money is certain to be there on a specific Wednesday.

Payroll has a property most expenses do not: the date cannot move, and missing it costs you the workforce. That changes how you should weigh certainty against cost.

Where a line of credit wins

Cheaper on the same dollars. Interest on what you draw, no per-invoice fees, no notification to your customers, no timesheet submission, no reporting cycle tied to your pay run. If your availability comfortably exceeds a payroll and the need is occasional, this is the obvious answer and a payroll-specific product is an expensive solution to a problem you do not have.

Where a line of credit fails

It does not grow with the payroll.A fixed limit funds the same size pay run forever. A labour business that doubles needs roughly double the working capital, and the line does not know that.

It can be reduced or frozen.Most commercial lines are demand facilities or contain material adverse change and borrowing base provisions. Availability can fall because your receivables aged, because a covenant tripped, or because the lender reviewed the relationship. None of those events schedules itself around your pay date.

Utilisation gets read badly.A line that never comes down to zero starts to look like a term loan to the lender's credit team, and clean-up provisions or annual pay-down requirements can arrive at renewal.

Timing.Draw cutoffs, same-day availability and whether funds land in the payroll account or the operating account all matter when the payroll file goes out Wednesday morning.

Where a payroll-specific facility wins

It is sized by the thing it is funding. Every hour worked creates a receivable, and the receivable creates availability, so a firm that adds a contract adds funding capacity in the same week. Approval is tied to documented, approved hours rather than to an annual credit review, and the operational rhythm is designed around pay cycles.

It also comes with structure that some firms need: verification of hours, discipline about invoicing, and someone chasing slow clients.

The certainty test, worked

Illustrative only —a staffing firm with a $600,000 line, currently drawn $380,000, and a weekly payroll of $148,000 including burden.

On paper the headroom is $220,000, comfortably more than a pay run. Then the borrowing base recalculates. A $1,250,000 ledger loses $180,000 to invoices aged past 90 days and a further $95,000 to a customer over the concentration cap, leaving $975,000 eligible. At an 85% advance rate, availability is $828,750 — not $600,000, so the stated limit still binds and nothing has changed.

Now suppose the same ledger deteriorates further, or the lender drops the advance rate to 80%. Availability falls to $780,000, still above the drawn balance. It takes a much larger swing before the formula bites, and that is the case for a line: on a healthy ledger the limit, not the formula, is the constraint.

The swing that hurts is a concentrated one. Lose a single large customer to a dispute and $300,000 of ledger can become ineligible in a week. At an 85% advance rate that is $255,000 of availability, which is more than the headroom in the example above and more than a pay run.

So the test is not "is there headroom today". It is "what is the largest single-customer or single-event move my ledger can make in one week, and does the headroom survive it".

What it costs you beyond the fee

Notification of your clients where the facility is on a notification basis, a lien on your receivables that blocks other lenders, weekly submission work, and usually a term commitment with minimums.

How to decide

Ask one question: on your worst forecast week in the next twelve months, is there enough certain availability, on the specific day the payroll file must be funded, to cover it?

If the answer is yes on a line of credit, use the line and keep the cost. If the answer depends on the lender not reducing availability, or on receivables not ageing, then you do not have payroll cover — you have payroll cover most of the time. For a payroll obligation, that distinction is the entire decision.

Some firms run both: a line for general working capital, and a receivables facility used only when the payroll gap widens. That works only if the two lenders have agreed their positions in writing, because both will want the same collateral.

What to ask each lender before you choose

Of the line's lender.Is the facility committed or repayable on demand? What is the exact borrowing base formula, including the age limit, the concentration cap and the advance rate? What notice do I get before availability is reduced? Is there an annual clean-down requirement, and when does it fall? What time of day is the draw cutoff, and does the money land same-day?

Of the payroll facility.What is the funding turnaround from submission of approved hours? What happens on a week when a client disputes a timesheet? Is the facility notification or non-notification, and what exactly will my clients be told? What are the minimum volume charges, the term commitment, and the notice period to exit? What is the fee if I fund a payroll and the client pays late?

Of both.What is the total cost over a full year at my realistic utilisation, not at the headline rate? A line drawn at 60% all year and a receivables facility at a per-invoice fee can be compared only once both are expressed as annual dollars against the same average balance.

Running both without breaking either

Where a firm keeps a line for general working capital and a receivables facility for the payroll gap, the collateral question has to be settled in writing before the second facility funds. Both lenders will want the receivables.

The usual mechanism is an intercreditor or subordination agreement carving out the financed invoices, or a borrowing base in the line that excludes anything assigned to the factor. Either way it is negotiated between the two institutions, it takes weeks, and it is not something to start in the week you need the money.

Two practical failures to avoid. Signing the second facility while the first agreement's negative pledge is still in force is an event of default even if every payment has cleared. And allowing the same invoice to sit in both borrowing bases is a misrepresentation to one of them, usually discovered at a field exam.