Finance for paying staff wages when cash runs behind

Wages are the one bill most owners will pay before their own. Rent can be negotiated and a supplier can sometimes wait a week, but staff expect their money on the day, and the law backs them. So when the bank balance two days before payday doesn’t cover the pay run, it’s worth knowing exactly what finance can do, what it can’t, and how to stop the same squeeze recurring every month.

What does a pay run actually cost now?

Most owners think of payroll as the net figure that lands in staff accounts. The cash that leaves the business is bigger, and since 1 July 2026 it leaves faster.

Component	Where it goes	When
Net wages	Employees’ bank accounts	Payday, on the cycle your award or agreement sets
PAYG withholding	ATO	With your BAS or monthly activity statement
Super guarantee (12 per cent of qualifying earnings)	Each employee’s super fund	Seven business days after payday, as a general rule
Payroll tax	Your state or territory revenue office	Monthly, only once wages exceed your state’s threshold
Workers compensation	Your state scheme or insurer	Premium schedule

Two changes in 2026 pushed the figure up. The Fair Work Commission’s 2026 review lifted award minimums by 4.75 per cent, effective from each employer’s first full pay cycle starting in July. And the end of quarterly super means the 12 per cent can’t be parked in the business account for a quarter or more any longer. If you were used to that float, the cash needed around each payday has jumped. Our page on finance for paying superannuation looks at that change in detail.

Timing gap or margin problem?

Before borrowing a dollar, answer one question honestly: does the business earn enough over a normal month to cover wages, or not?

• A timing gap looks like this: the work is profitable, but a big customer pays in 45 days while staff are paid weekly. Or a seasonal business has a quiet month before a busy one. Finance is a sensible bridge because the money to repay it is already on its way.
• A margin problem looks different: wages, rent and supplier costs add up to more than revenue, month after month. Borrowing to cover payroll here only delays a harder decision about pricing, rosters or overheads, and adds repayments to the pile.

Lenders ask the same question, mostly by reading your bank statements. A short, explainable dip they’ll fund. A steady slide they’ll be wary of. If you’re not sure which you’re facing, plot the coming weeks with our cash flow gap calculator, setting expected receipts against outgoings over the coming weeks.

Which finance fits a payroll gap?

Ranked roughly from cheapest and simplest to more specialised:

1. Business overdraft or line of credit. The natural home for recurring payroll gaps. Interest runs on the drawn balance alone, so an idle limit costs little. Banks offer these and are often the cheapest option if you qualify. See business lines of credit.
2. Invoice finance. Where unpaid customer invoices are the cause, invoice finance releases the bulk of each invoice within days of it being raised. The limit expands alongside turnover, handy when extra contracts mean extra hires.
3. Short-term unsecured loan. Useful for a one-off shortfall, such as a big customer paying late or a slow month after a lost contract. Fintech lenders can move quickly on bank statements alone, but the total dollar cost is usually higher, so keep the term short.
4. Property-secured funding. When the gap is large, or you need time to restructure, a loan secured on property can be cheaper per month and longer in term. A caveat or second mortgage can be arranged quickly for urgent amounts.

What to avoid: stacking several short-term online loans to cover consecutive pay runs. The daily or weekly repayments eat into the next payroll and the problem compounds. If you’re already there, our page on refinancing expensive short-term debt is the place to start.

Have a pay run coming up that cash won’t stretch to? Let us know the numbers. A minute is all it takes, and lenders checking your file later won’t see any trace of the enquiry.

How much should the facility be?

Size it on the worst realistic week, not the average. A simple method:

1. Total one full pay cycle: gross wages plus super, plus PAYG withholding if your activity statement falls in the same window.
2. Count the pay cycles in your longest gap. If your largest customer pays 45 days after invoice and you pay weekly, that’s up to seven pay runs funded before their money arrives.
3. Subtract the receipts you can count on during that window from other customers.
4. Add a buffer for a late payment or an unexpected cost, often 10 to 20 per cent.

The result is the limit you want. Ask for a facility of that size even if you’ll rarely use all of it. An unused limit costs little, while a too-small one fails you exactly when you need it.

Mistakes that make payroll harder to fund

• Waiting until the day before. Approvals for a new facility take days, sometimes weeks with a bank. Arrange the limit in a calm month.
• Using the ATO as a lender. Holding back PAYG withholding or super to pay net wages creates a far bigger problem, including possible personal liability for directors through director penalty notices.
• Paying staff from a personal credit card. It muddies the books and makes your next loan application harder to read.
• Ignoring the award increase. If your pricing was set before 1 July 2026, check that margins still cover the higher wage bill.

Worked example: a landscaping business with weekly pay

An illustration only. A commercial landscaping and grounds maintenance business on the Sunshine Coast employs nine staff, paid weekly. Its largest contracts are with body corporates and a regional council, which pay 30 to 45 days after invoice.

Item	Weekly
Gross wages	$13,500
Super guarantee at 12 per cent	$1,620
Cash out each week for staff	$15,120

In spring, the business wins two new council maintenance contracts and hires three extra staff. Revenue rises, but the first council payments won’t arrive for six weeks. The owners map the gap and find a peak shortfall of around $52k before receipts catch up.

Their bank offers a modest overdraft increase but not the full amount. Instead, they set up an invoice finance facility over the council and body corporate invoices, which advances most of each invoice within a day or two of issue. A small existing overdraft covers the rest. As the contracts mature, the facility limit grows with the invoice book, and the owners stop dreading the Thursday pay run.

Getting payroll off your worry list

We hear about payroll pressure constantly. More often than not it points to growth or a sluggish customer, not a business in trouble. The fix is a facility sized for your real pay cycle, arranged before the next crunch.

Tell us about your payroll in the enquiry form; it’s about sixty seconds’ work, and your credit standing isn’t touched by asking. We don’t pass you around a long chain of lenders. Instead a member of our team looks over your situation and phones you. Be straight about your wage bill, your customers’ payment terms and any existing loans, and we can steer you towards something suitable without wasted rounds.

Sort out funding for your next pay run →