Patellar Luxation is very common in small breeds of dogs, but is less common in larger dogs (like yours). This condition is when the patella (kneecap) slides out of the groove that it should sit in. Patellar Luxation is usually given a grade from 1-4 with a I/IV being the mildest and a IV/IV being the most severe. Mild cases are usually fine without surgery, but, like your vet says, when it gets more severe and painful for the dog, surgery is usually needed.
As far as paying for the surgery goes, you have several options. First, get an estimate from your veterinarian so that you know up front about how much money you need to come up with. The first option is to let your veterinarian know that you have limited funds. Work with your vet to see if there is a way to cut costs on the estimate. (For example - we put a fee for laser surgery on the estimate. If a client can't afford it, the vet will remove that fee and not use the laser during surgery. The incision may take longer to heal, and the pet may have more surgery site pain, but if it comes down to it - better that way than no surgery at all.) If you have a good relationship with your vet (been a long-time client, always paid up front, no bad checks etc.) they may extend a payment plan for you. They will likely still want a deposit up front. I don't know where you are located, but in the U.S. you can apply for Care Credit which is a line of credit like a credit card, but it can only be used for health care things (I know they have it for pets and for people, but I don't know if they are interchangeable). Some vet hospitals have a fund to help owners when something large like surgery comes up and they cannot pay for it. (I know that Tufts in Massachusetts has a fund specifically for situations like this.) Sometimes other organizations have them also. Your vet may know of other local resources. Of course you could always sell things on auction sites, have a yard/garage sale etc. I know people that have baked lots of yummy treats, brought them to work, and told their coworkers that they can have some for a donation to whatever they are raising money for.
Last but not least - If you decide to shop around to get the best price on the surgery, use caution. Compare estimates to make sure that the standard of care is the same. Remember that it's often true; you get what you pay for.
