What is payroll finance? Payroll finance explained
Thursday 3rd February 2022
Last updated: 21st November 2025
In this article:
- What is payroll finance and payroll funding?
- How does payroll finance work?
- Why do businesses use payroll finance and payroll funding?
- Is payroll finance right for your business?
What is payroll finance and payroll funding?
Payroll finance, also known as payroll funding, is a financial solution designed to help small to medium sized businesses manage their payroll obligations. This form of financing allows businesses to access funds tied up in unpaid invoices, ensuring employees are paid on time even when cash flow is tight.
How does payroll finance work?
The process is straightforward:
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Invoice clients: Continue your usual invoicing process.
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Submit invoices: Forward these invoices to your finance provider.
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Receive advance: Within 24 - 48 hours, receive up to 90% of the invoice value.
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Client payment: Your client pays the invoice amount to the finance provider.
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Receive remainder: Once payment is received, the remaining balance is forwarded to you, minus any fees.
This approach ensures a steady cash flow, allowing you to meet payroll commitments without delay.
Why do businesses use payroll finance and payroll funding?
Businesses often face challenges like delayed client payments or seasonal fluctuations, which can strain cash flow. Payroll finance offers:
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Timely payroll: Ensures employees are paid promptly.
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Improved cash flow management: Provides immediate access to funds.
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Outsourced credit control: Finance providers often manage credit control, saving you time and resources.
Is payroll finance right for your business?
If your business experiences:
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Seasonal demand: Fluctuating cash flow due to seasonal trends.
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Late payments: Waiting 30–90 days for client payments.
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Rapid growth: Expanding operations requiring additional working capital.
Then payroll finance could be a suitable solution to maintain operational stability.