Why Offer Employee Hardship Loans


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A financial safety net can mean a world of difference when employees face an unexpected expense.

A single unexpected bill can financially destabilize many people. Currently, less than half of Americans could pay for a $1,000 emergency expense from savings, according to Bankrate survey. Market Watch reports that more than a third of Americans would struggle to pay for an unexpected auto repair that’s more than $500. If your employees reflect the U.S. workforce, 86% get to work by automobile. If they can’t afford a car repair, they can’t get to work. A loan program can help prevent smaller financial challenges from derailing a person’s employment and more.

A financial safety net for employees

To help employees through a financial rough patch, some employers offer employee hardship loans. These limited programs define the conditions of the loan and how it must be repaid.

Typical employee hardship loan parameters include:

  • A definition of what qualifies as an emergency. This may include the death of a family member, being a victim of a crime, urgent medical treatments not covered by insurance or an unforeseen calamitous event. Some employers include assistance when an employee/spouse/partner is deployed for the military.
  • A length-of-service qualification. For example, emergency loans may only be available to those who have been with the organization for at least one year.
  • Many employee hardship loans are made available to full- and part-time employees.
  • A cap on the loan amount, often $1,000 or $1,500.
  • An application and process for evaluating requests.
  • One-time access; employees can get a hardship loan only once.
  • A repayment plan through paycheck deductions.
  • The employee must provide supporting documentation to demonstrate their need for financial assistance.

As long as the funds are treated as a loan, they’re not considered taxable income for the recipient.

An alternative to loans: hardship grants

The U.S. Chamber of Commerce Foundation says many employers set up hardship relief funds to help employees recover more quickly from financial challenges. They provide funds that don’t need to be paid back in the form of grants to the employee in need.

Often companies partner with a public charity that has expertise in providing emergency aid to administer their employee assistance funds.

Getting started

Whether your employee hardship assistance is provided as a loan or a grant, you can keep the funds in an interest-bearing business savings account.

Work with qualified legal and tax advisors to ensure your employee assistance program is impartial, protects employee privacy and adheres to IRS requirements.

A financial safety net like an employee hardship loan can mean the difference between an employee slipping into poverty or getting back on their feet financially.


All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on credit worthiness, qualifications, and collateral conditions. Federally insured by NCUA

Consumers business loans

Do you have business banking questions? Contact our knowledgeable commercial loan officers.

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