If you are a small-scale business owner looking for a working capital loan to get your business off the ground, there are many options you could take into consideration. Some of these include SBA 7(a) term loans and non-secured working capital loans. You may also want to look into alternative financing models that can be used 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 business owners who require working capital. These loans are flexible and can be used for numerous reasons. The funds can be used to refinance debt, expand your company, or purchase assets.
The SBA guarantees a part of the loan to reduce the likely that lenders will default. However, a fee is charged to guarantee the loan. This fee is usually 3.75 percent of the guarantee amount of the loan.
Anyone interested can gain more information about the SBA 7(a) loan by looking through the SBA website. They will also be able access the SBA Lender Match Tool, which matches applicants with lenders that have been approved within two days.
Like most loans, the rate of interest for 7(a) loans can vary in accordance with the amount borrowed and repayment conditions. It could be fixed, variable, or tied to the Prime Rate.
You’ll need to fill out an application form to be eligible for an SBA 7(a) loan. The lender will go over your financial information and analyze your business plan. After approval, you’ll 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 investment regardless of whether you are expanding or starting out. It can be used to pay for equipment, expansion or to upgrade your building, among other things. The right type of loan will make your business thrive.
It can be much easier than you imagine to get a capital loan. Unlike a line of credit you can obtain a loan with a one-page application. You can also use 3 months of bank statements from your company to fund your loan.
Unsecured loans carry higher interest rates. This is because the lender takes on greater risk. In this regard an owner of a business should have a high credit score to be able to qualify. In addition, you should have a plan to repay the loan in a timely manner.
Unsecured working capital loans can be a great way for your company to bridge 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. Getting a working capital loan will enable you to remain in business even during difficult economic times.
Another benefit of an unsecured working capital loan is that you do not have to pledge any of your assets. Typically lenders will request the payment processor’s URL and the deposit account.
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Small businesses have other financing options
Alternative financing models for small-sized businesses are fast becoming the preferred choice for many entrepreneurs. These flexible financing options can provide the cash you require for expansion.
Alternative loans are also less expensive than traditional ones. Banks usually require large down payments and you could be waiting a long time before they are able to provide the cash you require.
Some alternative business loan options include lines of credit invoice discounting, credit cards and cash advances from merchants. These options can help you to quickly get funds.
Business lines of credit function exactly the same way as credit cards, but they charge interest only on money that you take out. These options are particularly beneficial for expenses that are short-term.
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Working capital loans are a great option to cover the cost of daily expenses, such as ordering inventory or paying employees. However, they aren’t the best suited for large-scale business changes.
Be sure to choose a lender with experience in alternative business loans. Your credit score is important. Your chances of getting a favorable financing deal are better if have a higher credit score.
Peer-to peer lending is another alternative financing model for small businesses. Peer-to-business lenders provide loans to small businesses from multiple investors, similar to crowdfunding. This is especially beneficial for small companies that do not have collateral.