Most small businesses need external support in form of loans or grants to be able to operate in their day-to-day business activities.
Cash services and payday loans are one of the most common financial support aids most small businesses usually opt for.
Though they provide a little helping hand in form of financial assistance to businesses they have lots of cons attached to them.
Hence, we will be looking at what the term payday loans mean in business, how they work and whether they are legal or not.
What Are Payday Loans?
Payday loans are usually loans provided by small merchants to businesses or sometimes individuals.
These sorts of loans provide financial aid to small businesses as expect them to pay within a fixed period which may be about 30 days or less.
While it is said that these loans can help boost the day-to-day operation of small businesses as they need funds to function properly it should also be considered that payday loans come with higher rates of interest which stands to be one of its major disadvantages.
How Does Payday Loans Work?
Small businesses look for merchants who can be able to lend them a lump sum of money in helping to boost their sales operation.
Payday loans doesn’t necessarily need business owners to remit items for collateral what is only expected of every business owner who wants to take a payday loan is mostly the site of the business.
The payday loan merchant will advise that business owners who want to gain loans must have a tangible business or better occupation to yield trust.
Are Payday Loans Legit or Unsecured?
It can be said that most payday loans are unsecured as most times the merchant may not have a verifiable business location and can unnecessarily increase interest accrued to loans given out.
In other words, payday loans can be risky for business uses and should only be taken if it is legit and fair.
Are Payday Loans Interest Rate Fixed or Variable?
Yes, they are fixed. Payday loans usually adopt the fixed interest mechanism hence, a loan of $100 may have an attached interest rate of $20 whereas a payday loan of $200 may attract an interest rate of $40.
They are usually fixed and are expected to pay between short periods as they can’t be considered as long term loans.
Is It Good to Take a Payday Loan for Your Business?
It all depends on the risk involved as most payday loans may cause more harm than good to your business if you take them.
Some payday loans can be luring with high interest rate attached and such types of loans are not expected to be taken by small businesses as the business may not be able to pay up before the expected time given.
Taking payday loans should all be at your own risk.