Should You Ever Get a Daily Payment Business Loan for Your Company?

Getting a Daily Payment Business Loan for Your Company?

Small business owners can quickly find themselves stretched to the limit when times are tough. With bills coming in faster than money, it’s easy to feel you’re out of options. Thankfully, there is a solution available: daily payment business loans.

Does the thought of paying daily concern you? Are you fearful of paying an interest rate that’s too high? Is getting short-term business loans always the right option for your company?

In this article, we’ll answer “Should You Ever Get a Daily Payment Business Loan for Your Company?” by looking at the pros and cons of this business loan option so that you can make an informed decision about whether it makes sense for your business.

What Is A Daily Payment Business Loan?

Many business financing options are available when it comes to financing your business. One of these options is a daily payment business loan. 

These loans allow you to receive financing based on your future sales, which can benefit businesses with a daily cash flow, like a restaurant or a carwash. These business cash advances work well with companies that get a lot of daily credit card or debit card transactions.

The advance is paid back daily through an automated (ACH) system, and you don’t have to worry about making payments on time or dealing with late fees. The amount of the business cash advance is based on your future sales and can be adjusted as needed. (Technically, advances are not loans).

A Merchant Cash Advance is short-term financing available to small businesses, and MCA finance includes quick approval and funding. You repay these advances with a fixed percentage of the company’s future cash flow (sales), and the fixed rate is your “holdback.”

If your business needs quick cash but needs to meet the criteria for a traditional loan with a monthly payment, consider applying for a cash advance instead.

If your company has a sporadic or seasonal cash flow, merchant cash advance providers can provide funds the same day you apply. 

As a small business owner, you may need a better credit score (always check your credit report before applying). The business cash advance is perfect for a company that processes a high volume of credit card sales daily but doesn’t qualify for a business term loan.

How Does A Daily Payment Business Loan Work?

A daily payment business loan can be an excellent option for your company if you need quick access to capital and is looking for same-day business loans. This small business financing allows you to make small, daily payments instead of one large payment each month.

As the name suggests, the repayment term involves making a daily loan payment to the lender instead of monthly payments. The payment term can be between 3 and 18 months, and the loan amount can range from a few thousand dollars to $2 million. Depending on the lender, the annual revenue you need to qualify can vary from $35,000 to $200,000 minimum.

So, Should You Get A Daily Payment Business Loan For Your Company?

There are several benefits to getting a daily payment business loan. They offer flexibility and usage for various purposes – from working capital to inventory to marketing or advertising.

They’re also a good option for businesses with bad credit, poor business credit, or new (3 months or more in business). 

However, there are also some risks associated with these loans that you’ll need to be aware of before taking out one. For example, making daily payments can be difficult for some businesses, and if you cannot make payments on time, you may incur penalty fees or considerable debt.

Additionally, daily payment business loans often have higher interest rates than traditional loans, which could increase your overall costs.

Understanding these risks can help you decide whether a daily payment business loan is right for your business.

What Lenders Offer A Daily Payment Business Loan?

Alternative lender

Alternative lenders are an excellent option for businesses looking for a daily payment business loan. These lenders, like Sunwise Capital, offer flexible repayment terms and often have lower interest rates than traditional banks.

Plus, they typically don’t require collateral or a credit check, making them ideal for businesses with bad credit or no credit history.

Online lender

Online lenders, like alternative lenders, are another excellent option for businesses looking for a daily payment business loan. These lenders offer quick and easy capital access while tailoring repayment terms to your needs.

Compared to traditional banks, online lenders don’t require collateral or a credit check, making them ideal for businesses with bad credit or no credit history. Plus, they often have similar interest rates as alternative lenders.

Private lender

Private lenders are another option for businesses looking for a daily payment business loan. These lenders typically offer more flexible repayment terms than traditional banks while having higher interest rates.

However, private lenders may require collateral or a credit check, so there may be better options for businesses with bad credit or no credit history.

The three types of lenders above are often the same and interchangeable.

Pros of A Daily Payment Business Loan

One of the most significant advantages of a daily payment business loan is that it can quickly provide you with the funds you need. The speed to funding is especially beneficial for businesses that need money immediately, such as those dealing with unexpected expenses or those looking to expand their operations.

Another benefit of a daily payment business loan is that it can help you manage your cash flow more effectively. With this type of loan, you don’t have to worry about making payments on time or dealing with late fees. 

Automated daily payments can help you stay on top of your finances and within your company’s available cash.

Cons Of A Daily Payment Business Loan

The biggest downside to a daily payment business loan is that it can be expensive, and the interest rates are often higher than traditional loans, so you may pay more in the long run. Additionally, some lenders may require a business license or other forms of collateral, which can be challenging to obtain.

Finally, it’s important to remember that a daily payment business loan is a short-term solution, and you should only use this type of loan if you need money quickly and have a plan for paying it back.

How Much is too Much for a Business Loan?

Taking a daily payment loan is advisable only if you are confident that your business will be able to generate consistent revenue throughout the loan term.

If you need more clarification about your business’s ability to make money, you are better off using other financing options.

However, if you think daily repayment is something your business can afford, and the benefits outweigh the risks, feel free to go ahead.

Factors to Consider Before Applying for a Daily Payment Business Loan

Consider the overall cost of the loan, including the interest rate, fees, and other associated costs.

Compare the loan terms and conditions of different lenders to find the best deal for you and your business.

Read the fine print before signing any daily payment business loan contract.

Research the lender’s customer service policies and reputation for ensuring you deal with a trustworthy company.

Alternative Business Loans You May Want to Consider

Before deciding whether to get a daily payment business loan for your company, there are several alternatives to consider.

These include factoring, lines of credit, and short-term loans.

Factoring is a financing option where a company sells its accounts receivable to a third-party lender in exchange for immediate cash.

A business line of credit<span data-preserver-spaces=”true”> is a loan that enables you to borrow up to a certain amount and pay it back over time.

Short-term loans are another option for businesses that need money quickly. These loans typically have a shorter repayment period and higher interest rates than traditional loans, but they can provide the funds you need in a pinch. Short-term loans are designed for businesses that need money quickly and can be paid back within a few months.

SBA loans. The Small Business Administration (SBA) is an independent agency of the federal government that supports small businesses in the United States. The SBA offers multiple loan programs to help entrepreneurs start and grow their businesses, and these loan programs do not include daily payment options.

Equipment financing<span data-preserver-spaces=”true”> allows businesses to purchase equipment or machinery without paying for it upfront.

Equipment financing is an excellent option for businesses that purchase equipment or machinery but need more funds to pay for it upfront. With an equipment financing loan, companies can spread the equipment’s cost over time and make regular payments. 

This type of loan can benefit businesses that need to upgrade their existing equipment or purchase new equipment to stay competitive.

Working capital loan. A working capital loan is a funding option that provides businesses with the funds they need to cover their day-to-day expenses. Working capital loans are typically short-term loans for anything from payroll to inventory purchases.

Secured loan. A secured loan is a business loan requiring the borrower to provide some form of collateral to secure the loan. This collateral can be in the form of real estate, equipment, inventory, or other assets. 

The lender will then use this collateral as security for the loan, and if the borrower defaults on their payments, the lender can seize and sell off the collateral to recoup their losses.

What’s the Best Business Loan?

Ultimately, the decision to get a daily payment business loan for your company reflects your individual needs and financial situation. 

Consider all the pros and cons before deciding, and ensure you understand the terms and conditions of any loan you take out. 

Additionally, research different lenders to find the best deal for you and your business.

Conclusion

A daily payment business loan can be an excellent option for businesses that need money quickly and have a plan for paying it back. However, it’s important to remember that these loans can be expensive and may require collateral. 

Before taking out a business loan, make sure you understand the terms and conditions and plan to repay the loan on time.

When considering a daily payment business loan, it’s essential to consider your options and analyze if the overall function of the loan is beneficial for your company. Weigh out the pros and cons by calculating how much money you will make from this loan and why you need the money in such an urgent matter.

Although it may seem appealing, make sure you can navigate these daily payments to ensure that this financing is viable for your company. Do your research and ask yourself if it is most beneficial for you in the long run.

Sunwise Capital is here to help you make the best business decisions. Contact us today to learn more about our financing options, small business loans, and how we can help you get the funds you need.

FAQs

How to apply for a daily payment business loan? 

Answer:

To apply for a daily payment business loan, you will need to submit a loan application with the lender. This application will provide information about your company, and it’s unlikely that you’ll need to submit a business plan, financials, or any collateral.

The business lender will review your application and decide whether to approve the loan. Sunwise Capital offers a one-page application and requires the last three months of business bank statements. 

Is a merchant cash advance a financing option with daily payments?

Answer:

Yes, a merchant cash advance is a financing option with daily payments. This type of loan is a short-term financing tool. Repayment is through daily (or weekly) charges automatically deducted from your business’s bank account. The repayment amount is a percentage of your daily sales.

What are daily payment loan interest rates?

Answer:

The interest rate for a daily payment business loan will vary depending on the lender and the amount of money you borrow. Generally, these loans have higher interest rates or factor rates than other financing options. It is essential to compare different lenders and their terms before deciding.

The rate can range from 10-30% depending on the lender and the amount of money you are borrowing. Sometimes it’s a factor rate ranging from 1.2 to 1.5.

Since MCAs are not loans and do not charge interest, you cannot calculate the interest rate or APR. The factor rate adjusts for the risks and the success of your company’s sales, and increases in sales can strengthen your case for a reduced factor rate.

You can calculate the fee or cost of taking the funds. You multiply the factor rate by the principal amount borrowed. If a business receives $100,000 and the factor rate is 20%, the total amount owed would be $120,000 ($100,000 times 20%). 

Is a daily payment loan suitable for all types of companies?

Answer:

A daily payment loan is only suitable for some companies. Depending on the lender, some may require collateral or have specific requirements for businesses to qualify.

It is crucial to consider the terms and conditions of the loan before signing any agreement. Ensure you understand the repayment schedule, interest rate, and other fees associated with the loan.

Additionally, it is vital to make sure that you can make consistent payments on time to avoid defaulting on your loan. Sunwise Capital offers flexible repayment options and competitive rates for daily payment business loans.

Can I use my personal assets as collateral for a daily payment loan? 

Answer:

Yes, you can use your personal assets as collateral for a daily payment loan. However, it is essential to understand the risks associated with this type of financing and make sure you are comfortable with them before proceeding. Additionally, consider other financing options that may suit your business needs.

Are there any tax implications when applying for a daily payment loan for my business?

Answer:

There are tax implications when applying for a daily payment loan for your business. Depending on the loan you take out, you can deduct interest payments from your taxes. Talking with a qualified tax professional is essential to ensure you take advantage of all available deductions and credits.

What happens if I default on a daily payment loan?

Answer:

If you default on a daily payment loan, the lender may take action to recover the funds legally. This action could include seizing any collateral you have as security for the loan or taking other measures. It is important to understand the terms of your loan and make sure you can meet your repayment obligations to avoid defaulting on the loan.