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What Are Business Payday Loans?

Payday loans can be temporarycommercial loansthat allow consumers to get cash quickly at a fixed interest.The majority of them have a maximum limit of $500, which can be extremely expensive for the person who is borrowing them according to theConsumer Financial Protection Bureau.The borrower pays back payday loans as soon as they receive their pay.( )

Businesses’ payday loans don’t technically exist since payday loans are fundamentally consumer-focused financing.However, the concept of merchant cash advances has been compared to the phenomena in payday loans, granting them the title “business payday loans.”

Fortunately, you can steer clear of this risky type of funding by taking advantage of less expensive kinds of business financing that are short-term such as:

  • Factoring and financing invoices
  • Lines of credit
  • Short-term loans
  • Credit card for business credit card

The Dangers of Payday Loans

Payday lenders typically charge about $15 per $100 loaned astronomical amount.The fees, when added to the typical cash loan amount of $350, and when applied to a two-week loan, can result in an APR of more than 400 percent.This is one of the highest-priced short-term loans available on the market, business or otherwise.

It shouldn’t be any surprise that payday loans are a common practice to trap people with cash problems in a cycle of high-cost debt.But, payday loans still present attractive, simple cash to people across the nation.In fact, business owners are now starting to question whether there are any business payday loans.

Are There Business Payday Loans?

As we’ve mentioned that there’s no actual alternative to payday loans, as payday loans depend on a fundamentally distinctive popular phenomenon that is a result of the consumer’s pay schedule.

Business income typically comes in on a more flexible basis than weekly, biweekly, or monthly checks that people rely on. But that doesn’t mean small businesses aren’t in need of cash from time to time when they wait for their clients to pay for their products and services.

Merchant Cash Advance: A Business Payday Loan of Sorts

A lot of industry experts have started referring to the termcommercial cash advancesas the equivalent business to payday loans.

The cash advance for Merchants is a type of capital that allows small-sized companies to sell their future credit card earnings in a lump sum capital.

To determine the total amount of the debt that a cash advance by a merchant will result in, simply divide the amount you’ve received by the factoring percentage attached to your loan.If, for instance, you’re given $100,000, with an interest rate of 1.25 the amount you’ll be owed $125,000 at the final.

You’ll repay any debt from a merchant cash advance by paying an annual proportion of your company’s credit card revenue.This percentage is immediately transferred to the merchant cash advance company until the total amount owed is paid in full.Rapid repayment turnarounds and high factor fees can put the rates of merchant cash advances in the same category as the rates for payday loans, nearing a staggering 400 percent.Due to their expensive cost and their sweeping acceptance, cash advances for merchants are sometimes referred to less kindly by the name of “business payday loans.”

4 Business Payday Loan Alternatives

If you’re seeking commercial financing that you can get and pay off quickly, you must look beyond “business payday loans,” which promise easy financing however they canbe a serious threat tolimit your business’s daily cash flow and could even put you into a huge pile of costly business debt.

To stay clear of the hassle of payday loans without sacrificing the cash you require take a look at these affordable and affordable but still fast-to-fund and simple to be eligible for: business financing options.

1. Invoice Financing

A method of small business financing with one of the fastest turnaround times can beinvoicing financing.With invoice financing businesses are able to get capital to pay their accounts receivable.The concept is similar to that of a payday loan but without the high APRs.

This is due to the outstanding invoices you can borrow against with invoice financing act as collateral that helps secure the loan. Due to the self-secure character of invoice finance, the lender is taking on less risk when providing you with funds. In the end invoice financing is going to be much more affordable for borrowers than payday loans do.

Invoice financing is able to fund your invoice remarkably quickly. A lot of invoice financing companies are able to give a credit decision in a matter of minutes, and approve applications within a single day.

2. Short-Term Lines of Credit

A quicker, more affordable, and safer alternative to payday loans is a short-term business line of credit. These lines of credit function similarly to credit cards for business credit cards, however without having a physical credit card and with the ability to access cash-based funding instead of just credit. With this type of financing lenders provide a credit limit that you can be able to withdraw funds when needed.

When you take money from a business line credit then you’ll pay back that amount, including interest, for a set period of time. You won’t have to have to pay interest on anything that you don’t utilize on your credit line.

Credit lines for businesses with shorter repayment terms credit with shorter repayment terms are very quick to fund and easy to be eligible for. If you’re trying to get quick cash and make yourself eligible to be able to access future more rapid funding, an unsecured commercial line of credit is the best alternative to a payday loan.

3. Short-Term Loans

In addition, if there aren’t any outstanding invoices to use as collateral however you’re seeking one-time access to fast funding, these loans are a great alternative to payday loans. Short-term loans operate similar to condensed versions of traditional credit cards. Similar to short-term loans, term loans are capital lump sums that you have to repay, with interest, within a set time period of repayment.

Contrary to traditional term loans, however, short-term loans generally have terms for repayment that are less than a year. Also, short-term loans have lower loan amounts, more frequent payments, and more expensive interest rates.

However, the shorter repayment time implies that these loans are much easier to obtain and will be quicker to pay off. Thus, although these loans are more expensive than traditional loans, they’ll nevertheless lower in cost than the majority of options for cash advances from merchants. Additionally, their speedy applications and underwriting procedures can make them a great option for business payday loans.

4. Business Credit Cards

If you have personal credit that is a minimum of 580 points, you’ll be able to access credit in a matter of minutes using the commercial credit account. It may seem odd to consider an enterprise credit card as an economical option for spending. In many instances, APRs attached to business credit cards are cheaper than payday loans. Additionally the fact that numerous commercial credit cards provide zero-introductory APRs that last as long as 12 months.

This means you’ll be allowed to carry an interest-free balance month-to-month for a full year in certain instances. After the initial period is completed, however, the variable APR will be set.

Remember that you must make your minimum monthly payments punctually and incompletely.In the event that you fail to do so, you’ll lose the remainder of your zero percent intro APR time.If you’re currently in a cash flow gap and are looking for credit to access and then the 0% intro APR card might be the most cost-effective option.


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