Small Business Loans: Should You Request Daily Payments?
The payment structure for a small business loan affects cash flow, which impacts your ability to handle routine expenses and cover operating costs. Daily and weekly payments have become the new norm for paying back an online lender.
Through other arrangements, you might find withdrawals for thousands of dollars hitting your back account. Loans with daily payments break this amount down into smaller chunks. For modern business owners—who juggle operating expenses with payroll, marketing, and more—this is a more practical alternative.
How can daily payments help your business?
Do Daily Small Business Loan Payments Make Sense?
You can think about a loan payment schedule the same way you’d consider your reason for taking out a loan. You want something that meets your financing needs and works with your budget.
If you issue invoices and get most of your cash from monthly invoices, monthly payments might appear to make more sense. But in reality, daily payments are far lower—meaning they’ll take less of a toll on your back account.
Regardless of your customer/client payment frequency, daily small business loan payments can simplify things for your business. If a lack of cash flow is an issue you’ve had in the past, you’re not alone: 36% of business owners consider this their top challenge. Daily payments can help you better manage your cash flow—and give you much-needed peace of mind—as you pay off the loan.
Because every business has unique needs, you should always approach lenders with your situation and needs in mind to avoid the wrong arrangement. Also, be sure to discuss the payment structure and how payments are collected prior to putting in an application. If your lender is unwilling to discuss this arrangement, then it may be worthwhile to consider finding a more trustworthy source of capital.
Online lenders often use ACH payments. This takes the work off your plate by automatically deducting the daily amount from your business bank account until the loan is paid off. Although this means you don’t have to worry about accidentally missing a payment, it does mean you’ll have to diligently budget and manage your cash flow.
Even if the cost or rate is greater than you anticipate, it generally still makes sense to take on financing. If financing can help you to generate more revenue that you would have otherwise, it’s far more profitable than doing nothing. Financing also enables you to retain more of your earnings than reaching out to investors would.
Financing with daily payments doesn’t limit your options, either. There are several programs through which you can get competitive rates and terms for your business.
Calculating Your Small Business Loan Payments
To be sure you have enough in your business bank account to cover ACH withdrawals, it’s important to know exactly how much you’ll be required to pay each day.
A business loan calculator can help you compare offers from multiple lenders, with a close estimation of projected payments. You can use this helpful tool to determine how much the loan payments account for a typical day’s sales.
Calculations will vary depending on whether your daily payment is a fixed amount or a percentage of sales. The latter method is more common with cash advances, and payments are deducted from the total credit card sales you make every day, rather than your bank account.
Because these payments fluctuate, they can be a little more difficult to determine. But based on past and projected credit card sales, you can estimate to get an idea of the amount you’ll pay out.
Percentage payments allow you to pay off the balance based on how many sales you make. If you experience spikes and drops in sales throughout the year, then a business financing solution with this structure may be more beneficial.
Regardless of the loan or financing option you’re looking for, knowing what you’ll owe per day can point you toward the best deals. Remember to include additional fees in your calculations.
Once you run the numbers, you’re ready to start applying to lenders with daily payment options.
Budgeting for Daily Payment Business Loans
With your loan or financing option broken into daily chunks, budgeting to make payments should be easier. However, there are still a few ways that you can prepare your business to always make these payments.
Creating (and sticking to) a budget is critical if you want to make the most of your loan and ensure you’re ready for each payment. Because you’ll be putting part of each day’s earnings toward your balance, you need to commit to setting money aside. Otherwise, you put yourself at risk for overdraft fees, late payment penalties or defaulting on the loan.
If you don’t already monitor your spending, be sure to start doing so before seeking funding.
Switch from paper logs to accounting software to improve visibility, minimize errors and map out every expense. Include fixed and variable costs, employee spending and a buffer for unexpected expenses to create a baseline for your loan budget. Then, add in your loan payments, which should be deducted every weekday except for bank holidays.
The amount you have left will tell you where you need to reduce expenses to meet your daily payment obligations.
Having a solid budget in place should mean you’re set to cover the cost of your loan. However, it doesn’t make your business immune to emergencies. Ask lenders about late payment grace periods, or handling situations where you find yourself unable to cover the daily amount.
Keep an eye on your bank statements, as well, to ensure payments are debited correctly and automatic withdrawals stop when the loan has been paid in full. Communicating with your lender throughout the loan terms helps you avoid problems and correct errors quickly.
Small Business Loans with Flexible Repayment Options
Lenders offering a daily payment plan give you the flexibility to pay off your loan on a schedule that’s right for your business. You get funding you can afford, without the risk of defaulting and are free to focus on maintaining daily operations and planning for growth.
At National Business Capital & Services, we have access to a global 75+ lender marketplace to provide the best loan structure for every applicant.
Small business loans with flexible terms are available for companies in all industries, and National is ready to work with you to secure funding.
After applying, you’ll be paired with a Business Financing Advisor, who will help you from application to funding. Get in touch today to discover your financing and payment options.
National Business Capital & Services is the #1 FinTech marketplace offering small business financing and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
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