If you are an owner of a small-sized business seeking a working capital loan to help your business get going there are many options you could consider. Some of these include SBA 7(a) term loans as well as unsecured working capital loans. Alternative financing models could be available to help finance your small-sized business.
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SBA 7(a), term loans
SBA 7(a) and term loans are available to small-scale business owners who require working capital. These loans are flexible and can be used for many purposes. The funds can be used to repay loans, expand your business or even purchase assets.
The SBA guarantees the loan in part so that lenders are less likely to default. However, a fee is paid to guarantee the loan. The fee is usually 3.75% of the guaranteed amount of the loan.
The interested parties can get an understanding of the SBA 7(a) loan by looking through the SBA website. They will also be able access the SBA Lender Match Tool, which connects applicants with lenders that have been approved within two days.
As with most loans, interest rates for 7(a) loans will differ according to the amount and the repayment conditions. It could be fixed, variable or tied to the Prime Rate.
You will need to complete an application in order to apply for an SBA 7(a), loan. The lender will review your financial history and assess your business plan. After approval, you will sign a loan agreement to receive the loan funds.
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Unsecured working capital loans
No matter if you’re just beginning or expanding, a non-secure working capital loan could be an investment that is financially sound. It can be used to purchase equipment to expand your business or to upgrade your building. The right choice will help your business thrive.
Getting a working capital loan could be much simpler than you think. A loan can be obtained using just one page, unlike the line credit. You can even fund your loan using 3 months of business bank statements.
Unsecured loans have higher interest rates. This is because the lender takes on greater risk. Therefore, a business owner must have a strong credit score in order to be eligible. You must also have a plan for repaying the loan on time.
Unsecured working capital loans are a great option to fill a financial gap in your company. With a working capital loan allows you to take advantage of low rates on key products and upgrades to your facilities. A working capital loan will allow you to keep your business running during tough economic times.
An unsecured working capital loan has another advantage: you don’t have to pledge any of your assets. The lenders will usually ask for the services of a payment processor and a deposit account.
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Alternative finance models for small-sized businesses
Many entrepreneurs are choosing alternative financing models for small businesses as the most preferred option. These flexible financing options can provide you with the cash you need for expansion.
Alternative loans are also less expensive than traditional loans. Banks typically require large down-payments and you may need wait for a while before getting the money you require.
Alternative business loan options include lines of credit invoice discounting, credit cards and cash advances for merchants. These options all offer you the opportunity to obtain money quickly and conveniently.
Business lines of credit function similarly to credit cards, but they charge interest only on the money that you withdraw. These options are particularly useful for spending on short-term expenses.
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Working capital loans are a great option to cover the cost of daily expenses, such as purchasing inventory or paying employees. However, they aren’t the best suited for large-scale business transformations.
If you are choosing a lender to get an alternative business loan, make sure you select a company that has expertise. Also, take into consideration your credit score. Your chances of getting a favorable loan deal are greater if you have a better credit score.
Peer-to-peer lending is another alternative method of financing for small companies. Peer-tobusiness lenders offer small businesses loans from many investors, similar to crowdfunding. This option is especially beneficial for small businesses that don’t have access to collateral.