Payroll funding for a timing gap, not a bad month.

Why profitable businesses still run short on payroll

Payroll is the one bill that never moves. Revenue does. Most payroll crunches in healthy businesses come from one of these:

• Slow-paying customers. Commercial and B2B customers on net-30 or net-60 terms mean you pay your people for weeks before you're paid for their work.
• A new contract that needs a crew first. You hire and pay workers for a job that won't produce its first payment for a month or more.
• Staffing up before a busy season. Training new hires in spring for a summer peak means paying them before they're billable.
• The three-payday month. On a biweekly schedule, two months a year have three paydays instead of two. Revenue doesn't rise to match.

In each case the money is coming; it's just behind the expense. That's what an advance is built for.

When an advance for payroll makes sense, and when it doesn't

It tends to make sense when:

• You can point to the revenue that closes the gap: an invoice, a signed contract, a season you've seen before.
• You can say roughly when the gap ends, and it ends well inside the term of the advance.
• Your deposits are steady enough that a daily or weekly payment won't create the next shortfall.

It doesn't when:

• Payroll is short every month because costs are higher than revenue. An advance delays that problem and adds a cost to it.
• You're behind on payroll taxes. Unpaid payroll taxes can carry penalties and, in some cases, personal liability, so talk to your accountant or a tax professional before anything else.

If the shortfall is structural, we'd rather say so than fund it; see responsible funding.

How much payroll funding do you need?

Work it out in paydays, not months. A rough method:

1. Count the paydays in the gap. From now until the money you're waiting on actually lands.
2. Use fully loaded payroll. Wages plus employer taxes, benefits and workers' comp, not just net pay.
3. Subtract what still comes in. Your other deposits keep arriving during the gap.
4. Check the payment. The new daily or weekly payment comes out of the same account as payroll, so make sure both fit on your tightest week.

Then check the payback window: the gap should close well inside the term (up to 10 months with InstaFunders), so most payments are covered by the revenue you were waiting for.

How the payments work alongside payroll

Payments are a fixed daily or weekly ACH debit from your business account, set from an agreed percentage of your sales. Because payroll leaves the same account, look at the week your payroll hits and make sure the payment still fits after it. Weekly payments are available in many cases and are often easier to plan around a biweekly payroll; see weekly payments. If your sales drop, you can ask for a reconciliation to bring the payment in line with what's actually coming in.

What to have ready

A signed and dated application and your last three months of business bank statements plus month-to-date (four months for California businesses). Include every business account. If payroll runs from a separate account, send that one too, or the underwriter sees only half the picture.

Before funding we'll ask for a driver's license and voided check for each owner, and a current A/R aging report or recent card processing statement. For a payroll gap caused by slow-paying customers, the aging report is useful: it shows exactly what's owed to you and when. The full list is on the requirements page.

Other ways to cover payroll

• Invoice factoring. If the gap is unpaid B2B invoices, selling those invoices can match the funding to the exact receivables you're waiting on. See MCA vs. invoice factoring.
• A bank line of credit. Cheaper if you qualify and can arrange it before you need it. See MCA vs. line of credit.
• Better billing terms. Mobilization payments, deposits or progress billing on new contracts can shrink the gap at the source.

Frequently asked questions