If you are an owner of a small-sized business seeking a working capital loan in order to get your business going, there are many options you could look into. Some of these include SBA 7(a) term loans as well as non-secured working capital loans. Alternative financing models could be available to finance your small business.
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SBA 7(a) and term loans
SBA 7(a) (term) loans are available to small-scale entrepreneurs who require working capital. These loans are flexible and are able to be used for many purposes. You can use the funds for refinancing debt, expanding your business, or buying assets.
The SBA guarantees a portion of the loan to reduce the likely that lenders will default. However, a fee will be paid to guarantee the loan. The cost is usually 3.75 percent of the loan’s guarantee amount.
People interested in applying can get an understanding of the SBA 7(a) loan by checking out the SBA website. They also have access to the SBA Lender Match tool, which matches applicants to SBA-approved lenders within two days.
As with all loans the interest rate on a 7(a) loan will be contingent on the amount and repayment terms. It could be variable, fixed or linked to the Prime Rate.
To apply for an SBA 7(a) loan, you will need to fill out an application form and get it approved. A lender will review your financial history and evaluate your business plan. After approval, you sign a loan agreement and receive the loan funds.
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Unsecured working capital loans
A working capital loan that is unsecured is a smart financial decision regardless of whether you are expanding or just starting out. It can be used to buy equipment or expand your business or even to upgrade your facility. The right choice will help your business grow.
It can be much easier than you might think to obtain a working capital loan. As opposed to a credit line it is possible to get the loan using a single application. You can even fund your loan with 3 months of bank statements for business.
Unsecured loans carry higher interest rates. This is because the lender is taking on more risk. To be eligible, a business owner must have good credit ratings. You must also have a plan for repaying the loan on time.
Unsecured working capital loans are a great way for your business to cover short-term financial gaps. Using a working capital loan allows you to take advantage of discounted prices on important products and improvements to your facilities. A working capital loan will allow you to keep your business afloat even in tough economic times.
Another advantage of an unsecured working capital loan is the fact that you do not need to pledge any of your assets. Typically lenders will ask for the payment processor’s URL and an account for deposit.
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Smaller businesses have other financing options
Alternative financing models for small businesses are fast becoming the preferred option for many entrepreneurs. These flexible financing options can give you the funds you require for expansion.
Alternative loans are cheaper than conventional loans. Banks usually require large down payments, and you may be waiting a long time before they will be able to give you the money you require.
Lines of credit, merchant cash advances invoice discounting, credit card, and credit cards are all options for business loans. These options can help you quickly obtain funding.
Business lines of credit function exactly the same way as credit cards, but charge only interest on the amount that you withdraw. These options are particularly useful for spending on short-term expenses.
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Working capital loans are useful to cover the cost of daily expenses, such as purchasing inventory or paying employees. However, they’re not an appropriate for large-scale business transformations.
Be sure to choose a lender who has experience in alternative business loans. Your credit score is important. The higher your score, the higher your chances of securing the best financing deal.
Peer-to-peer lending is another alternative finance option for small-sized companies. Similar to crowdfunding, peer-to-business lenders provide small businesses with loans from a variety of investors. This option is particularly beneficial for small companies that do not have collateral.