First: the two things you never skip
Pay wages on the regular payday. New Jersey's Department of Labor says most employers must pay wages at least twice during each calendar month, on regular paydays designated in advance [6]. If wages go unpaid, the state's wage laws let employees recover the unpaid amount plus liquidated damages equal to not more than 200 percent of it [7]. A late payroll can cost three times the payroll.
Make your payroll tax deposits on time. The money withheld from paychecks belongs to your employees and the government. The IRS charges a failure to deposit penalty of 2% if a deposit is 1 to 5 days late, 5% at 6 to 15 days, 10% after 15 days, and 15% if still unpaid more than 10 days after a notice [5]. If the taxes stay unpaid, the IRS can assess the Trust Fund Recovery Penalty personally against the people responsible for paying them [8].
Paying other bills first is a red flag to the IRS
The IRS says using available funds to pay other creditors when the business cannot pay its employment taxes is an indication of willfulness [8]. If cash is short, payroll and payroll taxes come before vendors.
Next: the money that costs nothing
Before you borrow, look at what is already owed to you. Call the customers with open invoices and ask them to pay before the holidays. Many will, especially if they also close their books in December. A small early-payment discount can still be cheaper than any financing on the table.
- Ask large customers to pay open invoices before December 20.
- Ask key vendors for 15 or 30 extra days on your December bills, in writing.
- Move any owner draws or bonuses to the first January payroll if you can.
- Check whether your bank can release pending card deposits sooner.
Then: a line of credit, if you have one
A line of credit is the cheapest borrowed money most small businesses can reach in a hurry, because you pay only on what you draw and only for as long as you keep it. Across the market NerdWallet puts line of credit rates at 10% to 99% APR [1]. Drawing $20,000 for 30 days costs about $164 at the low end.
The catch is timing. A line takes time to open, so it helps most if you applied before the crunch. If you do not have one, apply now for next time, even if you use something else this December.
Last: factoring, then an advance
If you bill other businesses and your cash is stuck in unpaid invoices, factoring turns them into cash now. NerdWallet says factoring companies often charge 1% to 5% of the invoice value per month [2]. On $20,000 of invoices that is $200 to $1,000 for a month.
A merchant cash advance is a purchase of your future sales and is usually the fastest option, but it is the costliest on this list. With factor rates typically 1.1 to 1.5 [3], a $20,000 advance costs $2,000 to $10,000, and the daily or weekly collection starts right away, into the slow weeks of January. If you use one, take only what payroll needs.
Plan for January's higher payroll now
January brings its own payroll increase in New Jersey. The state minimum wage rises to $16.48 an hour for most employees on January 1, 2027, and to $16.25 for seasonal and small employers with fewer than six employees [4]. If any of your team is near the minimum, rebuild your January payroll budget before you decide how much to borrow in December.
If the gap is real and you need money this month, Batch Capital can check lines, factoring and advances together so you can compare the dollars side by side. Our working capital guide explains each option in more depth.