How to Reduce Employee Bad Loans in the Retail Industry

Getting a loan from work is quite convenient for many employees. We are not surprised most people would instead ask their bosses for loans when they have any financial emergency. After all, that is where they get paid, so repaying the loan is easy, so it is supposed to be. However, in some situations, most HR retail managers have to handle cases of employee bad loans.

When situations related to employee bad loans happen too frequently, the retail company’s finances suffer. Such situations can be avoided by learning how to reduce employee bad loans. There are many steps to achieve that. However, here are some reasons why you may observe a spike in demand for loans in the retail work environment:

What Is an Employee Bad Loan?

Employee bad loans are monies the employer may not be able to get back after lending the employees. This situation could happen for many reasons, but it is not suitable for the company.

Therefore, it is essential that employers find ways to reduce employee bad loans.

Here are some of the best tips to help you reduce employee bad loans:

Create a Proper Lending Structure

You can monitor and control the lending processes if you have an excellent lending structure. The employees will also realize it is an ordered system. They will then make proper plans to borrow money responsibly and use it for the intended purposes.

Set a Lending Limit

Without a lending limit, many employees may be tempted to borrow more money than they need. This is a recipe for disaster because they can default on loans after wasting money.

Having a lending limit helps ensure your employees only get the money they need, which they use wisely. Also, repaying the loan is easier since they have not collected too much.

Analyze Loan Requests Before Approval

Many loan requests you receive from employees may be unnecessary. It is best to collect loans for needs instead of wants. You can identify loan applications that are not urgent. This means the employee can wait until they receive their salary to spend on that thing they wanted to buy.

Check Credibility

You should be focused on lending money to credible employees only. Some people borrow money randomly and are heavily indebted. This is a red flag. You should avoid lending to employees who seem reckless with money. This way, you can help only employees who remain committed to repaying the money.

Set Clear Terms for Lending

Some employers become saddled with employee bad loans because the employees leave the company before they finish repaying the loan. This is not a good trend. However, it is difficult to tell whether an employee is planning to leave the company.

You can reduce employee bad loans by setting clear terms. These conditions include explaining that the employee cannot leave the company without repaying the loan. Also, the conditions should give the employer power to withhold benefits and other assets belonging to the employee until they repay the loan.

The terms may also include legal clauses that mean the employer can seek a solution in court to avoid losing money when a debt goes bad.

Financial Education

You can also organize special financial educative programs to inform and enlighten your employees about debt, financial intelligence, and ways to avoid bankruptcy.

These educative sessions will significantly help your employees manage their salaries better. In most cases, they may not need to borrow loans at all.

Send Reminders

You should also establish a system to send constant reminders to the employees who have collected loans from the workplace.

This helps reduce employee bad loans because they can make financial adjustments to ensure they repay the loan. Without reminders, your employees who took loans may make reckless financial commitments, forgetting they have a loan to repay.

Create Better Repayment Plans

The common cause of bad loans is when the employee becomes overwhelmed by the repayment structure. They may abandon all plans to repay the loan out of frustration in such situations.

Therefore, it is good to help them repay the loan conveniently. You can do that by creating the best repayment plan. This arrangement should allow them to repay a part of the loan and have enough money to survive until the next payday.

Reward Employees Who Repay Loans Promptly

You can encourage people who take loans from the workplace to repay what they owe. You can offer incentives such as a slight reduction if they repay everything before a particular date.

When employees know they can keep a small percentage of the money if they repay the loan as agreed, they will be more committed to the process.

However, it is best to clarify the conditions to get incentives. This helps prevent disputes during the lending and repayment process.


You should provide loans to employees when you can because it helps them handle urgent financial issues. However, you should not run at a loss due to employee bad loans. Please use the tips above to ensure the lending and repayment process is seamless.

Copyright © Queueme Technologies Pvt Ltd 2016