If you’re a small-scale business owner looking for a working capital loan to help your business get going there are plenty of alternatives you can take into consideration. A few of these options are SBA 7(a) term loans and non-secured working capital loans. Alternative financing models could be available to finance your small business.
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SBA 7(a), term loans
SBA 7(a) (term) loans are available to small entrepreneurs who require working capital. These are highly flexible loans that can be used for a variety of purposes. The funds can be used to refinance the company’s debt, grow it, or purchase assets.
The SBA guarantees some of the loan to ensure that lenders are less likely to default. However, a fee is paid to guarantee the loan. This fee is usually 3.75% of the guaranteed amount of the loan.
The SBA website provides a detailed explanation of the SBA 7 (a) loan. They’ll also have access to the SBA Lender Match tool, which connects applicants with SBA-approved lenders in just two days.
Like most loans, the interest rate on a 7(a) loan will be contingent on the amount and the terms of repayment. It is either fixed or variable and tied to the prime rate.
You’ll need to submit 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
Whether you are starting out or expanding, an unsecure working capital loan is an ideal financial decision. It can be used to fund equipment, expansion or to improve your building among other things. The right type of loan will make your business grow.
It can be much easier than you imagine to get a capital loan. Unlike a line of credit, you can get the loan using a single application. You can even use three months of bank statements from your business to finance your loan.
Unsecured loans have higher interest rates. This is because the lender takes on more risk. As such the business owner must have a great credit rating to qualify. Additionally, you must have a plan for repaying the loan on time.
Unsecured working capital loans can be an excellent way for your business to cover short-term financial gaps. By taking a working capital loan you can avail of lower prices on essential products and upgrades to your facilities. A working capital loan can allow you to continue to operate even during difficult economic times.
A working capital loan that is unsecured is another benefit because it doesn’t require the pledge of any assets. The lender will usually require the services of a payment processor and a deposit account.
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Alternative financing models for small businesses
Many entrepreneurs are opting for alternative financing models for small businesses as their preferred option. These flexible financing options can give you the cash you need for expansion.
Alternative loans are also cheaper than conventional loans. Banks usually require large down payments, and you might require a few days before they are able to provide the money you need.
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 credit lines are similar to credit cards, with the exception that they charge interest only on the cash you withdraw. These options are especially useful for short-term expenditures.
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Working capital loans are useful for day-to-day costs like paying employees or placing orders for inventory. They are not the ideal solution for large-scale transformations of businesses.
Make sure to choose a lender with experience in alternative business loans. Also, think about your credit score. The higher your score, the greater your chances of getting favorable financing deals.
Other alternative financing models for small businesses involve peer-to-peer lending. Similar to crowdfunding, these peer-to-business lenders provide small businesses with loans from several investors. This is particularly useful for small businesses that do not have collateral.