There are a myriad of options for small-scale business owners looking for working capital loans to help them get their business off the start. These include SBA 7(a) or term loans as well as unsecured work capital loans. You may also consider looking at alternative financing options that could be used to finance your small-scale business.
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SBA 7(a), term loans
If you are a small-scale business owner who is in need of working capital, you should consider applying for SBA 7(a) term loans. These are loans that are extremely flexible that can be used for a variety purposes. The money can be used to repay loans, expand your business, or purchase assets.
The SBA guarantees a portion of the loan to make it less likely that lenders fail. However, a fee is payable for the guarantee. This is usually 3.75% of the guaranteed amount of the loan.
The SBA website provides a comprehensive explanation of the SBA 7 (a) loan. They also have access to the SBA Lender Match tool, which connects applicants with SBA-approved lenders in just two days.
As with all loans the rate of interest on a 7(a) loan will depend on the amount and the repayment terms. It can be fixed, variable or linked to the Prime Rate.
You’ll need to fill out an application to apply for an SBA 7(a), loan. The lender will review your financial history and review your business plan. After approval, you will sign a loan contract to 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 or not you are expanding or starting out. It can be used to buy equipment or expand your business or to improve your building. The right choice will help your business grow.
A working capital loan is much simpler than you think. It is possible to get a loan by filling out a single page unlike the line credit. You can also use 3 months of bank statements from your business to fund your loan.
Unsecured loans carry higher interest rates. This is because the lender takes on greater risk. In this regard, a business owner should have a high credit score to be able to qualify. Additionally, you must have a plan to pay back the loan on time.
Unsecured working capital loans can be a great solution to bridge a financial gap in your business. By taking a working capital loan you can take advantage of low rates on key products and improvements to your facilities. A working capital loan will allow you to remain in business during tough economic times.
An unsecured working capital loan offers another advantage: it doesn’t require the pledge of any of your assets. Most lenders will require a payment processor and a deposit account.
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Small-scale businesses have additional financing options
Alternative finance models for small-sized companies are quickly becoming the preferred option for many entrepreneurs. They offer flexible financing options that will give you the funds you need to grow.
Alternative loans are also more affordable than traditional loans. Banks typically require substantial down payments, and you might need to wait a while before they will be able to give you the money you need.
Alternative business loan options include lines of credit, invoice discounting, credit cards, and merchant cash advances. These options can allow you to quickly get funding.
Business credit lines are similar to credit cards, with the exception that they charge interest only on money you take out. These options are especially beneficial for short-term expenses.
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Working capital loans are useful for daily expenses, such as paying employees or purchasing inventory. However, they’re not an an ideal solution for major business changes.
Make sure to choose a lender who has experience in alternative business loans. Your credit score is important. Your chances of getting a favorable financing deal are increased if you have a higher credit score.
Peer-to-peer lending is a different method of financing for small businesses. Similar to crowdfunding, peer-to-business lenders offer small businesses loans from multiple investors. This is particularly beneficial for small businesses that do have collateral.