In business, there will be times when you need to pay important bills – bills that cannot wait for payroll. The most convenient way to solve this issue is to apply for a payroll loan.
Payroll loans are unsecured and short-term financing options for your business. The amount you can borrow is usually less than $1,500 and the due date is usually within 2 weeks. It’s sort of an emergency loan that you have to give back as soon as your next paycheck comes in.
This type of loan can prove itself useful when the borrower needs to pay for any unexpected expenses. All the borrower needs to have is a checking account, where the lender draws funds from for repayment.
Here are some important things you need to know about a payroll loan, to help you understand it better:
- The fees for payroll loans are usually quite high, with an APR of around 15 to 30% – even more!
- As a lender, you may request for an extension in your due date, however fees will apply
- These loans can usually be approved and funded on the spot
- Payroll lenders don’t check credit scores
Why should you consider a payroll loan?
Since payroll loans are only a small amount, you can easily pay it off. As mentioned, though, it is important that you don’t get into the habit of depending on these loans, as they come with really high fees.
If you do have a good credit score and in need of a large amount of cash, you can look into other options such as small business loans or a business line of credit – you can even go for traditional loans.
However, if you have a low credit score and need a large amount, the best way to go would be alternative lending platforms. Just make sure you totally understand what you’re getting into and you have read, and discussed with a professional, all the information you will need to make a decision in terms of taking a loan.