 |
| 3 Reasons Why Same Day Business Funding Is A Bad Idea For Those With Bad Credit |
zlaxwin – If you’re starting your own business, or looking to expand it, it can be tempting to seek out same day business funding in order to get your idea off the ground quickly. However, those with bad credit shouldn’t consider taking advantage of these short-term loans because they come with serious hidden costs and risks. These risks and costs include significant interest rates on the money borrowed as well as surprise fees if you don’t meet certain conditions on time; this makes these loans far less useful than they appear. Here are three reasons why same day business funding can be a bad idea for those with bad credit.
high interest rates
Unfortunately, one of the realities of credit is that it comes with an interest rate. Borrowers pay this fee when they borrow money and it reflects the risk of borrowing from a lender. Borrowers also have to deal with varying terms as well as multiple types of loans. Same day business funding bad credit often results in high interest rates because lenders are taking on a lot more risk with such deals and need to be compensated accordingly.
*Borrower X used an SBA loan for $125,000 for a restaurant venture*
*The monthly principal and interest payment will be over $1,500 per month* Given the fact that SBA loans come with lower rates than those available from private lending institutions, many small business owners still choose them.
Because same day business funding bad credit carries higher interest rates, it is important to understand that borrowed money comes with strings attached. It can be tempting to get funds quickly if you have an urgent need, but think carefully before taking on high-interest loans. While they may appear to be a good deal in their early stages, they can become quite costly over time. Understand your borrowing options and choose wisely.
When it comes to business funding, many entrepreneurs often overlook private lenders in favor of loans guaranteed by agencies such as SBA. Although they carry lower interest rates, they still come with high costs due to their short-term nature. Unfortunately, that can lead borrowers down a path where no matter how much money they borrow for their business, it is never enough and requires them to continue borrowing additional capital.
short repayment terms
Same day business funding is a bad idea for those with bad credit because the companies that offer it will often ask you to pay back the money within a week or two. You could have gotten your line of credit at your bank, which would have been less risky and provided you much better long-term options. And while you would have had to fill out more paperwork and jump through more hoops, you would be guaranteed a line of credit with much better repayment terms if your business doesn’t do well in its first couple of months.
1) same day business funding bad credit
2) Same day business funding can limit your opportunities for growth by getting you too dependent on cash advances for short term needs like cash flow or purchasing equipment before inventory is generated.
The best option for small business credit is to get a merchant line of credit. This provides you with a revolving line of credit you can use to pay expenses and keep you cash flow flexible, which is how things should be at any level of business growth. If your cash flow goes up or down, as long as your line of credit isn’t maxed out it will remain available for you to make purchases or pay expenses.
If you get a merchant line of credit and it is maxed out, your bank will review your situation. Depending on how big you’re growing, they may give you a new line of credit or even increase your existing one. Or if things are going south, they may scale back their lending to you and that would force you to rely less on cash advances for quick cash. Which brings me to my last point…
you could end up paying more in fees than the amount you borrow
Though credit is hard to come by, if you do have any, same day business funding can be enticing. After all, who wants to wait days or weeks for approval? The answer depends on your financial situation. Same day funding is the latest way some companies offer loans, but there are downsides.
This type of financing usually comes with high interest rates and fees, both of which could end up costing more than the amount you borrowed. Other factors to consider are whether you can actually afford a loan and how much money it would take for you to cover expenses until your next paycheck. Always talk with a lender before applying for a loan to ensure that same day business funding bad credit fits your needs and budget.
If you’re tempted by same day business funding bad credit, it’s important to consider all aspects of your finances, including how much debt you already have and whether you can afford to pay back a new loan. Using such loans for emergencies can help with short-term cash flow, but never miss a payment. If same day funding is an option for your situation, consider looking at peer-to-peer loans or high-interest credit cards instead. These types of loans typically come with lower interest rates and fees than traditional business financing options like bank loans or lines of credit.
If you need extra cash in a hurry, avoid same day business funding bad credit at all costs. The high interest and fees charged on such loans can leave you paying way more than expected and digging yourself deeper into debt. Instead, try asking family members or friends for a short-term loan or consider selling some of your unused items to make money in a pinch.
If neither of these options are available to you, consider applying for a payday loan if your bank won’t approve your application for more traditional financing options like a line of credit or small business loan. Larger banks often have strict lending requirements that prevent them from offering assistance when it’s needed most.
