All businesses have both a peak and off-peak season – meaning a time of the year when demand is highest or lowest, respectively.
For small businesses, these two seasons can drastically affect their cash flow and, in turn, force small business owners to take a real hit paying off monthly loan debt during their off peak.
In order to help combat those monthly loan repayments and make them easier for a business owner to handle, many alternative lenders have created a repayment system known as micropayments or daily remittance. This is when an owner pays their loan “continuously based on payments more frequently than monthly (for these purposes, daily, weekday, weekly or bi-monthly payment or remittance schedules are considered daily remittance),” according to ABF Journal.
For seasonal companies especially, micropayments based on the percentage of daily receipts may be a deciding factor on whether or not they even seek out a loan. Solely based on the fact that they will be more comfortable knowing that their repayment method will reflect their daily sales, their financial stress will be greatly reduced, allowing their repayments to seamlessly flow with the seasons.
And like with most financial crises, psychology has a lot to do with it.
In general, micropayments are considered to be a good psychological tool to take control of debt. This holds weight based on the fact that micropayments will provide an owner “faster results” as they will see their debt reduced more frequently than they would if they only had monthly payments – granting them more of an immediate satisfaction and, in turn, keeping them motivated and positive.
And everybody knows that a positive business owner makes for a more profitable business.
Looking to seek out a small business loan? Consider micropayments. Grant yourself the financial freedom of steadily chopping down your debt into small increments, not allowing a large monthly payment to loom over your business’s head.