If your company needs a cash injection, the logical thing is to think about asking for a commercial loan. Your first option is to go to a bank or other traditional financial institution that offers credit options specifically designed to meet your business needs. But let’s be honest: approving your commercial loan application can be difficult. Strict requirements and complicated paperwork make this option more viable for well-established companies with constant cash flows and an increasing customer base.
Many companies do not fit into this category: young companies, small businesses that strive to grow their business, and even those that have been running for a while but do not meet the credit requirements of traditional lenders.
In cases like these, there is another option: apply for a personal payday loan for commercial purposes.
Yes it is. A personal payday loan can be used to pay your business expenses. But why would an entrepreneur want to use personal payday loan funds for commercial purposes?
To answer this question, let’s first understand the difference between the two types of financing.
What is the difference between a personal payday loan and a commercial loan?
1. Use of funds
Commercial loan: It can be used to buy inventory, pay employees, buy equipment or cover the costs of a marketing campaign. Money should be spent in a way that benefits your business.
personal payday loan: It can be used for virtually any purpose. You can use it both to pay for a vacation and to make the initial payment of your car. And you can also use it for your company.
2. Requirements and documentation
Commercial loan: In general terms, for a commercial loan you must meet more requirements than for a personal payday loan, because the lender is financing both the company and the individual. Your lender will ask you, at a minimum, your credit score, and will want to review the activity of your commercial bank account and have proof of your company’s registration. The same goes for paperwork and the amount of documents needed to approve your application, which depending on the lender can be abundant.
But keep in mind that the requirements for a commercial loan vary greatly from one lender to another, as well as the amount of documents you must prepare. Some lenders are more flexible than others. For example, alternative lenders such as Ferdies Financial only require nine months of operations, unlike the usual two years required by most lenders. And they require almost half the amount of documents that most lenders. Do you need to know more?
Check here the requirements for a more common commercial loan and how they compare with those of Ferdies Financial
Access here a complete list of the documents required by most lenders and how they compare with those of Ferdies Financial
personal payday loan: While in some cases your lender may only need to review your credit report and verify your payment receipts, they may request more documents (such as your financial statements) if you are requesting a larger amount of money. As a general rule, the larger and cheaper the loan, the more documents you will have to submit.
3. Process and approval
Commercial loan: Your lender will conduct a detailed credit evaluation and make its decision based on the potential of your company. While banks and other traditional financial institutions may take weeks or even months to approve your loan, lenders such as Ferdies Financial are a popular alternative because of their quick and easy process. You can receive the funds in a period of 5 to 10 business days.
personal payday loan: The approval process of a personal payday loan is usually much faster than in most traditional commercial loans. If your application is approved you can receive the funds in a few days.
4. Credit score
Both commercial and personal payday loan lenders will verify your personal credit score. But in addition, for a commercial loan you will also be asked for your commercial credit score.
Commercial loan: All commercial loans require a personal guarantee, but this is considered a rather weak form of guarantee, since it would require the lender to go to court to seize the borrower’s assets. In this sense, your personal assets are more protected than with a personal payday loan. In addition, many commercial loans require that you present collateral in the form of commercial assets. Of course, some specific types of commercial loans, particularly invoice financing and cash advances from merchants , do not need collateral. And don’t forget that commercial loans from alternative lenders like Ferdies Financial do not require collateral either.
personal payday loan: Contrary to popular belief, not all personal payday loans are unsecured (that is, without collateral). Some require you to present a guarantee: a mortgage is a classic example (your home being what works as a guarantee).
6. Loan amount
Commercial loan: The amount you can borrow will be decided by your lender based on the repayment capacity of your company. This will depend on your cash flow, your business credit history and the profitability of your company.
The amounts of commercial loans vary widely: they can be as small as $ 5,000 and reach hundreds of thousands of dollars or even millions ( SBA loans can reach $ 5.5 million). Therefore, if you need a large amount of capital, a commercial loan is definitely your best option.
personal payday loan: Lenders may impose a much lower limit. The maximum in most personal payday loans is $ 40,000, although it is possible to obtain approval for a higher sum. The average amount on a personal payday loan is approximately $ 8,000.
Advantages and disadvantages of using a personal payday loan for your business
Let’s look first at the advantages:
Advantage 1: Less paperwork
personal payday loans usually involve little documentation. You do not need to provide the balance of your company or your business plan. Your lender will offer you a personal payday loan based on your credit history and income (but again, remember that these are also the requirements for some commercial loans such as those offered by Ferdies Financial).
Advantage 2: Lower interest rate
This is one of the biggest advantages of a personal payday loan. While it is true that SBA loans and commercial loans from traditional banks usually have reduced interest rates, this rule does not always apply to all commercial loans. Some online lenders may charge you interest rates that reach 100%!
Learn here how to choose a business loan comparing interest rates
personal payday loans, on the other hand, have an interest rate of between 10% and 36%. Using a personal payday loan for your company can help you reduce the cost of your interests . If your commercial credit score is low, a personal payday loan can be a much cheaper option.
Advantage 3: Quick approval
It doesn’t take long to get approval for a personal payday loan. If you meet the personal payday loan requirements that your lender demands, the entire process, from beginning to end, can only take a few hours! If your company urgently needs funds, speed of approval could be a crucial factor.
That said, obtaining some commercial loans can also be super fast. While it may not take a few hours, in Ferdies Financial you can be approved as soon as one to four days.
Advantage 4: Available for companies that cannot obtain a commercial loan
Most commercial lenders do not offer financing to new businesses that have been running for a short period of time. If that is your situation, using a personal payday loan for your company could be a good option. But remember that in Ferdies Financial we require only 9 months in operation, unlike the two years that most commercial lenders usually require.
Now, let’s see the disadvantages of using a personal payday loan for your company:
Disadvantage 1: The amount you can request is limited
Commercial loans can be large sums. personal payday loans, on the other hand, are generally limited to $ 40,000.
Disadvantage 2: It does not help you build your business credit
A personal payday loan does not affect your company’s credit score at all. It will only affect your personal credit. This will prevent your company from establishing credit history.
Disadvantage 3: Mix your personal and business expenses
In general, it is not a good idea to combine your personal and business expenses. This can give you problems when doing the accounting of your company. It can also be a problem when it’s time to file your taxes. You will have to verify each entry in your bank statement and list the two categories separately.
Also, when you find it convenient to apply for a commercial loan, your lender will see a bank statement that includes personal and business expenses. This will create a bad impression.
Disadvantage 4: The amount you can receive is determined by your income level, not the potential of your business
Remember that the amount of the personal payday loan is determined by the level of your income and not by your business needs.
Therefore, if you find an opportunity that can be lucrative for your company and that requires an investment that exceeds what your income justifies, a personal payday loan will not be very helpful.
Commercial credit cards: a good alternative
What happens if your company cannot access a commercial loan and you don’t want to use a personal payday loan either? A commercial credit card can provide you with the money you need.
This is a very common form of financing among entrepreneurs. A recent report notes that small businesses in the United States use $ 13.9 million in commercial credit cards. The best commercial credit card issuers offer a range of benefits. We recommend choosing a card carefully and choosing the one that is most useful for your business. In addition, it is essential to adhere to a list of what is owed and should not be done when using a commercial credit card .
But for many entrepreneurs who urgently need money, there are still other options. Keep reading.
Ferdies Financial: personal payday loans and commercial loans that adapt to your needs
At Ferdies Financial we offer a wide range of financial products to meet your specific needs: personal payday loans backed by Lendify, microcredits and commercial loans. If you are not sure which is the best option for you, we will help you and guide you to guarantee your satisfaction.
Ferdies Financial personal payday loans
Ferdies Financial personal payday loans (backed by Lendify) are a better alternative than other personal payday loans for business owners. If your loan application has been rejected by a traditional bank, keep in mind that we have fewer requirements. Here are the highlights of applying for a personal payday loan from Ferdies Financial:
- Available to borrowers in California, Illinois, Arizona and Texas.
- Loan amount: from $ 300 to $ 4,000.
- Annual interest rates: from 34% to 36% plus an origination fee that ranges between $ 30 and $ 90.
- Amortization period: from 5 to 40 months.
- Your income must be at least $ 10,000 a year.
- We accept negative days where your bank statements are fine. You also don’t need credit history.
- Estimated financing time: 1 to 5 business days.
If you want a relatively small amount of money for your business and you need it quickly, the best option is a personal payday loan from Ferdies Financial.
Submitting your application online will not affect your credit, and it will only take a few minutes. You will be informed immediately if you have been preapproved to receive financing. Soon after, one of our representatives will contact you to guide you through the rest of the process. You can apply here for a personal payday loan from Ferdies Financial right now.
Ferdies Financial business loans
If your company needs a cash injection, consider applying for a commercial loan from Ferdies Financial . Our loans range between $ 5,000 and $ 400,000. We are more flexible than traditional lenders such as banks because, in order to approve your loan, we mainly take into account your personal credit and your company’s global cash flows. In addition, our loan funds can be used to pay personal payday loans or credit cards that have been used for commercial purposes. You can even use the loan to buy a second business. To apply for a loan with Ferdies, your company must generate sales of $ 30,000 per year or $ 2,500 per month, an amount much smaller than that required by other lenders, and your company must have been operating for only 9 months. That is much less than the 2 years that most lenders require.
All you have to do to get started is to fill in your loan application . It will only take a few minutes and you will receive an instant response informing you if you have been preapproved. Shortly after, one of our loan specialists will contact you and guide you through the rest of the process.