There are a myriad of alternatives available to small-scale business owners looking for working capital loans to get their business off the starting point. Some of these options include SBA 7(a) term loans as well as unsecure working capital loans. You might also look into alternative financing models that can be used to finance your small business.
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SBA 7(a) term loans
If you are a small company owner in need of working capital, you should consider applying for SBA 7(a) term loans. These are extremely flexible loans that can be used for a variety reasons. The funds can be used to repay 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 payable to guarantee the loan. This is typically 3.75% of the loan’s guaranteed amount.
The interested parties can get a better 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 with approved lenders within two days.
Like most loans, the rate of interest on a 7(a) loan will be contingent on the amount and repayment terms. It can be variable or fixed and tied to the prime rate.
To apply for an SBA 7(a) loan, you will need to fill out an application form and have it approved. The lender will review your financial records and evaluate your business plan. After the approval, you’ll sign a loan contract and receive the loan funds.
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Unsecured working capital loans
An unsecured working capital loan is a wise financial choice regardless of whether you are expanding or just starting out. It can be used to buy equipment, expand your business, or even to upgrade your facility. The right option will make your business grow.
The process of getting a working capital loan may be more straightforward than you think. Unlike a line of credit you can apply for an advance with just a single application. You can even use three months of bank statements from your company to finance your loan.
Unsecured loans are more expensive in terms of interest rates. This is because the lender takes a greater risk. To be eligible, a business owner must have good credit ratings. Additionally, you must have a plan to repay the loan on time.
Unsecured working capital loans can be an excellent option for your business to bridge short-term financial gaps. You can enjoy low costs for key products or improvements to your facilities by using working capital loans. A working capital loan will allow you to keep your business afloat during tough economic times.
Another great thing about an unsecure working capital loan is the fact that you do not have to pledge any of your assets. Typically lenders will require an online payment processor and the deposit account.
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Alternative financing models for small-sized businesses
Alternative finance models for small companies are quickly becoming the preferred option for many entrepreneurs. They provide flexible financing solutions that can help you get the money you require to expand your business.
Alternative loans are also more affordable than traditional loans. Banks typically require large down-payments, and you may have to wait a while before getting the funds you require.
Alternative business loan options include lines of credit invoice discounting, credit cards and cash advances from merchants. These options can allow you to quickly receive funding.
Business lines of credit work in the same way as credit cards, but charge interest only on the money that you take out. These options are especially beneficial for short-term expenditures.
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Working capital loans can be useful for everyday expenses such as ordering inventory or paying employees. They are not the ideal solution for large-scale transformations of businesses.
Make sure to choose a lender who has expertise in alternative business loans. Also, take into consideration your credit score. Your chances of getting a favorable finance deal are greater if you have a better credit score.
Peer-to-peer lending is another alternative method of financing for small companies. Peer-to-business lenders offer small businesses loans through multiple investors, much like crowdfunding. This is particularly beneficial for small businesses that do have collateral.