Are Small Business Payday Loans Right for You?

alibaba exterior

Small businesses can benefit from short-term loans, also called cash advances. After all, a payday loan is for amounts typically up to $500, depending on your state. For that reason, repaying it within 30 days shouldn’t be too big of an issue for the average American.

Business payday loans don’t exist as a separate category. Payday loans are for any consumer, regardless of their exact purposes when taking a loan. The term became famous due to the self-employed borrowers that take loans for business purposes.


Small business payday loans are for emergencies when you need quick financing. First of all, cash advances are easy to qualify for. Secondly, direct lenders don’t typically do any hard credit checks. That means you could qualify even with a poor credit score. Furthermore, you could receive your funds within one business day. Finally, if traditional lenders turned you down, chances are a direct loan provider will approve your request. That is, if you qualify, of course.


Payday loans may be an expensive option, depending on the specific offer you get. The charge is a flat fee between $10 and $30 for every $100 borrowed. The APR for such loans can be as high as 400%. If you cannot repay your loan on time, additional charges may apply. Relying too much on payday loans can result in a cycle of debt. Moreover, you cannot build credit with payday loans, but failing to repay your debt on time will negatively influence your score.


Short-term business line of credit. Like regular credit lines, this option allows customers to borrow as much money as they need, up to the credit limit. Afterward, you need to repay it, together with interest, over several months.

Short-term bank loans. If you have a good credit history, you may qualify for a short-term loan. In this case, you would borrow the money you need, then pay it back, with interest, over a pre-approved period. Short-term loans usually have to be repaid within one year.

Merchant cash advance. Lenders say a merchant cash advance is not a loan per se. In simple terms, you borrow money against a part of your future sales profit or repay the lender in daily or weekly lumps. MCAs are often described as expensive financial options.