If you’re an owner of a small-sized business looking for an working capital loan to help your business get going, there are many options you could consider. A few of these options are SBA 7(a) term loans as well as non-secured working capital loans. Alternative financing models may also be available to help finance your small business.
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SBA 7(a) term loans
SBA 7(a) (term) loans are available to small-scale business owners who require working capital. These are loans that are extremely flexible that can be used for a variety of uses. The funds can be used to repay debt, expand your company or even purchase assets.
The SBA guarantees a portion of the loan so lenders are less likely to default. However, a fee will be due to guarantee the loan. This is usually 3.75% of the guaranteed amount of the loan.
Anyone interested can gain a better understanding of the SBA 7(a) loan by looking through the SBA website. They can also access the SBA Lender Match Tool, which connects applicants with lenders who have approval within two days.
As with all loans, the rate of interest on a 7(a) loan will depend on the amount and the terms of repayment. It can be variable or fixed, and it can be tied to the prime rate.
You’ll need to submit an application to apply for an SBA 7(a) loan. The lender will go over your financial history and review your business plan. After approval, you will 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 or not you are expanding or starting out. It can be used to pay for expansion, equipment, or to upgrade your building, among other things. The right one will help your business thrive.
Getting a working capital loan can be much simpler than you think. Unlike a line of credit, you can get a loan by filling out a simple application. You could even use 3 months of bank statements from your business to fund your loan.
Unsecured loans come with higher interest rates. This is because the lender is taking on more risk. So, a business owner must have a good credit score to be eligible. You must also have a plan for repaying the loan in a timely manner.
Unsecured working capital loans are a great way for your company to bridge short-term financial gaps. You can obtain low prices on the most important products or upgrades to your facilities with working capital loans. Getting a working capital loan can allow you to continue to operate even in difficult economic times.
Another benefit of an unsecure working capital loan is the fact that you do not have to pledge any of your assets. Lenders will typically ask for a payment processor and a deposit account.
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Smaller businesses have other financing options
Alternative finance models for small companies are quickly becoming the preferred option for many entrepreneurs. They offer flexible financing options that will give you the money you need to expand.
Alternative loans are also less expensive than traditional ones. Banks typically require huge down payments, and you may be waiting a long time before they can provide the funds you require.
Other alternatives to business loans include lines of credit invoice discounting, credit card, and cash advances for merchants. These options can help you to quickly receive funding.
Business lines of credit work in the same way as credit cards, but they charge only interest on the amount that you withdraw. These types of credit are particularly beneficial to cover short-term expenses.
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Working capital loans are useful for day-to-day costs for example, paying employees or placing orders for inventory. However, they aren’t the best suited for major business transformations.
Choose a lender who has expertise in alternative business loans. Also, take into consideration your credit score. The greater your score, the higher your chances of securing the best financing deal.
Other alternative financing options for small-sized businesses include peer-to-peer lending. Peer-to-business lenders provide loans to small businesses from multiple investors, similar to crowdfunding. This is especially beneficial for small businesses that don’t have collateral.