The club told shareholders at Monday night's annual general meeting that a mid-season redistribution of wealth among Scottish Premier League clubs had been one of the major factors in posting the deficit.
The club honoured "generous" bonuses to players based on pre-season agreements despite the prize money for second spot being cut by about £900,000 in January.
Other factors in the deficit, for the 12 months up to the end of May 2013, were disappointing results in the cup and lower-than-expected transfer income.
Motherwell exited at the first hurdle in the League Cup, to Rangers, and Aberdeen in the William Hill Scottish Cup, when a Fir Park fourth-round replay cost them money after letting in season-ticket holders for free.
Turnover for the year was up more than £650,000 to almost £5.2million, mainly as a result of the club's participation in the Champions League and Europa League qualifiers.
The board stressed that the Well Society fan ownership project was "critical" to the club's long-term sustainability.
The fans' group, which has two representatives on the board, bought £150,000 worth of shares last season to help Motherwell through a temporary cash-flow shortage and the club are set to borrow more money from the society in the coming months.
The club, who do not have any bank debt, previously borrowed in times of need from former chairman John Boyle, who is still owed money.
Motherwell, who made a loss of about £600,000 in the previous season, cut their player budget in the summer but are one point behind second-placed Aberdeen in the Scottish Premiership, with a game in hand.
- Sports & Recreation
- Scottish Premier League