Do you ever wonder why it costs $10, $15, $20 or even more to borrow $100 from a payday lender?  There are quite a few reasons, but one reason is that it is expensive for payday lenders to process and issue payday loans.  It takes time, people, and resources to handle each loan application.  Lenders also have to deal (and budget) for the fact that some borrowers can't (or don't) payback their loans when they are due.  This is referred to as "bad debt", and it is expensive for lenders to deal with bad debt.  

A recent survey by the Canadian Payday Loan Association shows how expensive it is for a payday lender to issue payday loans.   The survey was done by Deloitte & Touche, and concluded that the average cost to issue and process a $100 payday loan is over $25.

The survey factored in operating costs, cost of capital, cost of supplementary capital (infrastructure and working capital), and bad debts. Operating costs were the biggest expense.  Here are the details from the survey (they show the cost to the lender for issuing each $100 loan):

- Operating costs: $20.43

- Cost of supplementary capital: $1.57

- Cost of capital: $0.52

- Bad debt costs: $2.69

Obviously, if payday lenders can't make a profit, they will go out of business.  While some might argue that would be a good thing, folks who need emergency cash will be left without options.