Can I use funding for staff costs, recruitment, training or locum cover?
Updated October 2025
The short answer — yes, with the right type of finance and clear use of funds
Yes, many UK business finance products can be used for staff-related costs such as wages, recruitment fees, training, and temporary or locum cover. Most working capital products allow “general business purposes”, which typically includes payroll and people costs. The key is choosing a funding type that permits these uses and being transparent about how the money will be deployed and repaid.
What you can and can’t fund with business finance
Permitted uses will vary by lender and product. Working capital loans, revolving credit facilities and invoice finance commonly permit staffing costs, whereas asset finance is usually restricted to the asset itself.
If you plan to fund salaries or locum cover, explain whether it’s a short-term bridge or a longer-term growth project. Lenders prefer a defined plan that links the spend to revenue, cost savings, or service continuity.
Why lenders care about staff-related funding
People costs are often recurring, so providers will ask how the cost will be sustained after the finance ends. Show that you’re using funding to smooth timing gaps, support a defined growth phase, or meet a seasonal surge. Demonstrate that the funding matches the cash flow profile of the need.
Typical product restrictions to keep in mind
- Asset finance: generally restricted to the purchase of the named equipment or vehicle.
- VAT or tax loans: typically restricted to HMRC liabilities, not payroll.
- Grant funding: often ringfenced for training or innovation, with evidence requirements.
Always check the lender’s permitted uses before applying. Your quoted terms will depend on credit profile, sector, security, and affordability checks.
Funding types that can support wages, recruitment, training and locum cover
Working capital term loans
Term loans spread a lump sum over fixed monthly repayments and are widely used for payroll continuity, recruitment campaigns, and structured training programmes. They suit planned, one-off costs like a multi-month hiring push or a defined upskilling period. Match the term length to the benefit period so repayments align with expected returns.
Revolving credit facilities and overdraft alternatives
A revolving credit facility lets you draw, repay, and redraw within an agreed limit, paying interest only on what you use. It can be ideal for funding locum cover, agency staff, or short recruitment spikes. Many businesses use it as a buffer to manage payroll during seasonal dips or delayed receivables.
Invoice finance (factoring or invoice discounting)
Invoice finance releases cash tied up in unpaid invoices, improving working capital without taking on a large fixed loan. It’s often used to fund ongoing wages, recruitment fees, and contractor costs while you wait for customers to pay. Facilities can grow with turnover, making it a sustainable way to support staffing as sales scale.
Merchant cash advance
For card-taking businesses, a merchant cash advance provides funding repaid as a percentage of daily card takings. It can be used for staffing needs in retail, hospitality, and leisure where card revenue is predictable. The flexible repayment model helps when income fluctuates throughout the week or season.
When a specialist product is not suitable
Asset finance, equipment leasing and hire purchase usually cannot be used for wages or recruitment. These products focus on funding the asset itself and are secured against it. If training relates to safely operating a newly financed asset, discuss whether related training costs can be included via a separate working capital facility.
Government-backed scheme context
The British Business Bank’s Growth Guarantee Scheme (GGS) supports eligible lenders to offer facilities that can be used for working capital, including staff costs. Scheme availability and eligibility vary by lender and sector. Check official guidance at the British Business Bank website for current details.
Planning your people investment — what lenders want to see
Build a clear use-of-funds plan
Set out exactly how the funding will be used across wages, recruitment fees, training providers, or locum shifts. Tie each cost line to an outcome such as maintaining service levels, hitting contract milestones, or accelerating revenue. Include a timeline so providers can see when benefits begin and how repayments are covered.
Forecast cash flow and payback
Show that your cash flow supports repayments even if income arrives later than planned. Include sensitivity scenarios such as slower hiring or longer customer payment terms. Lenders respond well to realistic assumptions and prudent buffers.
Estimate the return on people spend
- Recruitment: project the revenue or efficiency gains per new hire against total cost-to-hire.
- Training: quantify productivity uplifts, compliance avoidance costs, or margin improvements.
- Locum cover: calculate avoided losses from downtime, missed appointments, or penalties.
Document supplier quotes, training syllabuses, and any accreditation requirements. Strong evidence supports faster decisions.
Documents lenders may request
- Recent management accounts and bank statements.
- Debtor and creditor summaries, plus key contracts.
- Payroll reports, staff cost breakdowns, or recruitment plans.
- Training proposals, certifications, and compliance obligations.
If you’re funding locum cover, include proof of the underlying need such as staff leave schedules or clinical rota gaps. Transparency supports eligibility and pricing.
Compliance, affordability and security
Providers must check affordability and may require security or personal guarantees, depending on risk. Your rate and terms will reflect credit profile, sector performance, and facility type. Early preparation helps streamline approvals.
Practical examples by sector — including locum and training use cases
Healthcare: locum cover and clinical staffing
GP surgeries, dental practices and pharmacies often use funding to pay locums during staff sickness, maternity, or recruitment gaps. A revolving facility can cover short-term rota needs without disrupting core cash flow. If you bill the NHS or insurers, invoice finance may provide a steady bridge until payments land.
Hospitality and retail: seasonal recruitment and training
Bars, restaurants and shops use working capital to recruit and train seasonal teams before peak periods. Merchant cash advances can flex with card takings, serving as a pay-as-you-earn back model for staffing costs. Training further improves customer experience, average transaction values and repeat business.
Construction and trades: upskilling for new standards
Construction and building trades can fund CSCS cards, health and safety refreshers, and new technology training to qualify for larger contracts. Invoice finance can smooth payroll while you wait for staged payments. If you operate in building services, see our guidance on sector funding here: building services loans and finance options.
Professional services and education: recruitment pipelines
Accountancies, legal firms and training providers may fund structured recruitment and induction programmes to meet growth targets. A term loan can match the benefit period of a new trainee cohort. Revolving credit can support agency fees for specialist roles that take longer to fill.
Manufacturing and logistics firms frequently use invoice finance to support weekly payroll for shop-floor and warehouse staff. This aligns people costs with cash unlocked from issued invoices. The approach reduces reliance on expensive last-minute borrowing.
Next steps — eligibility, FAQs and how Best Business Loans can help
How our AI-led matching works
- Complete a Quick Quote: share your business profile, sector, funding amount and use of funds.
- AI analysis: our system maps your needs to suitable working capital and cash flow options in our network.
- Connection: we introduce you to lenders or brokers who can assess your case for staffing-related uses.
- You choose: compare terms, understand costs and decide the best route for your cash flow.
It’s fast, secure and free to submit an enquiry. There’s no obligation to proceed.
Eligibility snapshot
- Established UK businesses trading in eligible sectors.
- Clear business purpose covering staff costs, recruitment, training or locum cover.
- Evidence of affordability and stable revenue or strong order book.
- Willingness to provide documentation and, where required, guarantees or security.
We do not support start-ups, sole traders, franchises, property finance or commercial mortgages. Approval is not guaranteed and terms vary.
FAQs
Can I use a business loan to pay wages or payroll?
Yes, if the product allows general working capital, and you can show a credible repayment plan. Many lenders support payroll funding for short-term cash flow management or defined growth plans. Be ready to share projections and recent bank statements.
Will lenders allow recruitment fees and onboarding costs?
Yes, recruitment fees, advertising, onboarding and initial training are common eligible costs. Providers want to see how new hires drive revenue or efficiency. A clear hiring timeline helps.
Is training an acceptable use of funds?
Yes, especially for compliance, safety, accreditation, or productivity gains. Document course content, providers, and expected outcomes. Some grant schemes may also contribute to training budgets.
Can I fund locum or agency staff cover?
Yes, revolving facilities and invoice finance are often used for locum and agency costs. This is common in healthcare and professional services with fluctuating workloads. Keep evidence of the underlying service need.
What if I only need funding for a few weeks?
A revolving credit facility or short-term working capital option may be suitable. You pay interest only on what you draw. Align the facility to the duration of the staffing gap.
Are there government-backed options?
Eligible lenders may offer facilities supported by government guarantees that can be used for working capital. Check current details with the British Business Bank and your provider. Availability and criteria change over time.
Key takeaways
- Yes — you can use business funding for staff costs, recruitment, training and locum cover with suitable products.
- Working capital loans, revolving credit and invoice finance are common choices for people costs.
- Present a clear plan, show affordability and match the facility to the cash flow profile of the need.
Ready to explore your options and check eligibility for staff-related funding uses? Submit a Quick Quote today and get matched with suitable providers.
About Best Business Loans
BestBusinessLoans.ai is an independent introducer helping UK SMEs connect with suitable lenders and brokers. We do not lend directly and we do not provide financial advice. Any introduction will be to firms authorised and regulated where required.
All enquiries are handled securely and confidentially. There’s no obligation to proceed and no fee to submit your details.
Important information
All finance is subject to status, affordability and terms. Rates, fees and repayment periods vary by provider and product. Using finance to cover ongoing payroll requires a credible plan for sustained cash flow.
If you fail to keep up with repayments, your credit rating may be affected, additional charges may apply, and any security provided may be at risk. This content is for information only and should not be taken as regulated financial advice.