Most of us are used to paying our bills every month. Making monthly payments on expenses like your electric bill or mortgage is common and accepted. When it comes to business loans, however, small business owners can take advantage of another option: a daily repayment plan.
How Does a Business Loan Repayment Work?
Business loan repayment plans come in different shapes and forms, but you may be more familiar with monthly, weekly or even biweekly payments. Depending on the repayment time frame, you’ll pay back part of what you borrowed, plus any interest that accrued since your last payment. A shorter time frame between payments can often translate into a smaller amount of interest owed, but this depends on the type of loan and how the interest is calculated.
So how does a business loan repayment work on a daily schedule? It’s set up like it sounds, with automatic, recurring payments that are deducted each business day directly from your business account. Daily repayment plans are commonly associated with short-term loans or loans that can help with expenses like meeting payroll or expanding inventory while you wait for accounts receivable.
Why Daily Repayment Plans Are a Smart Idea
Some small business owners are surprised when they learn their business loan repayment terms will be daily, especially with some of the myths that exist around short-term loans. Once they understand how the repayment terms work, though, they enjoy the convenience and savings. Since the deductions are automatic, there’s no worry about missing a payment.
Daily repayment can also improve business cash flow and reduce the total amount of interest that accrues. A shorter repayment period means that less interest builds on the money you’ve borrowed.
Business owners have told us they like knowing what their exact daily payment will be, and appreciate that there’s no large payment due at the end of the month. One business owner said the daily payment wasn’t even noticeable, unlike a hefty, lump sum due each month.
Rest easy knowing that flexible repayment options exist, suited to the needs of a small business owner. That flexibility can help eliminate the risk of incurring extra charges and get you that much closer to paying off the loan.