If you are an owner of a small-sized business seeking an working capital loan to get your business off the ground there are many options that you may consider. A few of these options are SBA 7(a) term loans as well as non-secured working capital loans. Alternative financing models could be available to finance your small-sized business.
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SBA 7(a) and term loans
If you are a small business owner and are in need of working capital, you should think about applying for SBA 7(a) term loans. These are loans that are extremely flexible that can be utilized for a variety of reasons. The money can be used to refinance the company’s debt, grow it or even purchase assets.
The SBA guarantees a part of the loan to reduce the likely that lenders will default. However, a fee will be payable for the guarantee. This is usually 3.75 percent of the guaranteed amount of the loan.
The interested parties can get an understanding of the SBA 7(a) loan by visiting the SBA website. They will also be able to access the SBA Lender Match Tool, which connects applicants to lenders with approval within two days.
Like most loans, the interest rate on a 7(a) loan will depend on the amount and the repayment terms. It can be fixed or variable or pegged to the prime rate.
To apply for an SBA 7(a) loan, you will need to fill out an application and get it approved. The lender will review your financial history and review your business plan. After the approval, you will sign a loan contract and receive the loan funds.
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Unsecured working capital loans
Whether you are starting out or expanding, an unsecured capital loan is a wise financial decision. It can be used to pay for equipment, expansion, or to improve your building among other things. The right option will make your business grow.
The process of getting a working capital loan could be more straightforward than you think. A loan can be obtained using just one page unlike the line credit. You can even fund your loan with 3 months of business bank statements.
Unsecured loans have higher rates of interest. This is due to the fact that the lender is taking on more risk. As such an owner of a business must have a great credit rating to qualify. You should also have a plan to repay the loan on time.
Unsecured working capital loans are an excellent method for your business to cover short-term financial gaps. By taking a working capital loan allows you to take advantage of low prices on key products and improvements to your facilities. A working capital loan will enable you to continue to operate during tough economic times.
Another great thing about an unsecured working capital loan is the fact that you do not need to pledge any of your assets. Lenders will typically ask for an electronic payment processor as well as a deposit account.
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Alternative financing models for small-sized businesses
Alternative finance models for small businesses are fast becoming the preferred choice for many entrepreneurs. These flexible financing options can provide you with the cash you need for growth.
Alternative loans can also be cheaper than traditional ones. Banks usually require large down-payments, and you may have wait for a while before you can obtain the money you require.
Some other alternatives for business loans include lines of credit, invoice discounting, credit cards, and cash advances from merchants. Each of these options gives you the possibility of obtaining money quickly and conveniently.
Business credit lines are similar to credit cards, except they charge only interest on the cash you withdraw. These are helpful for short-term expenditures.
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Working capital loans can be useful for everyday expenses like purchasing inventory or paying employees. They’re not the ideal solution for large-scale business transformations.
When selecting a lender for an alternative business loan, ensure you choose a business that has prior experience. Also, take into consideration your credit score. The more impressive your score, better your chances of receiving a favorable financing deal.
Peer-to-peer lending is a different financing option for small businesses. Similar to crowdfunding, peer-to business lenders provide small businesses with loans from multiple investors. This option is particularly beneficial for small businesses that do not have collateral.