There are many alternatives available to small-scale business owners looking for working capital loans to help them get their business off the ground. These include SBA 7(a) or term loans and unsecured work capital loans. You may also want to look into alternative financing options that can be used to finance your small business.
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SBA 7(a) term loans
SBA 7(a) and term loans are available to small business owners who need working capital. These loans are flexible and can be used for a variety of reasons. The funds can be used to refinance the company’s debt, grow it or to purchase assets.
The SBA guarantees some of the loan so that lenders are less likely to default. However, a fee will be due for the guarantee. This fee is usually 3.75 percent of the guarantee amount of the loan.
Interested parties can get an understanding of the SBA 7(a) loan by looking through the SBA website. They will also have access to the SBA Lender Match tool, which connects applicants to SBA-approved lenders within two days.
Like all loans, the interest rates on 7(a) loans can vary according to the amount and the repayment terms. It can be fixed, variable or linked to the Prime Rate.
To apply for an SBA 7(a) loan, you will need to fill out an application and be approved. The lender will look over your financial history and review your business plan. After approval, you’ll sign a loan contract to receive the loan funds.
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Unsecured working capital loans
An unsecure working capital loan is a wise financial decision regardless of whether you are expanding or just starting out. It can be used to purchase equipment, expand your business, or to improve your building. The right option will make your business thrive.
Getting 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 even fund your loan with 3 months of bank statements from your business.
Unsecured loans are more expensive in terms of interest rates. This is because the lender takes on greater risk. As such the business owner should have a high credit score in order to be eligible. You must also have a plan to repay the loan on time.
Unsecured working capital loans are a fantastic solution to bridge a financial gap in your business. You can find low rates on essential products or upgrades to your facilities by using a working capital loan. Getting a working capital loan will enable you to keep your business running during tough economic times.
Another benefit of having an unsecure working capital loan is that you do not have to pledge any of your assets. Typically, lenders will ask for the payment processor’s URL and the deposit account.
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Small-scale businesses have other financing options
Alternative finance models for small companies are quickly becoming the preferred option for many entrepreneurs. They provide flexible financing solutions that can provide you with the funds you need to expand.
Alternative loans can also be cheaper than traditional ones. Banks typically require large down-payments and you may have to wait a few months before you can obtain the money you need.
Alternative business loan options include lines of credit invoice discounting, credit card, and cash advances from merchants. All of these options offer you the opportunity to obtain funding quickly and easily.
Business lines of credit function similarly to credit cards, but they charge only interest on the amount that you withdraw. These types of credit are particularly beneficial for expenses that are short-term.
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Working capital loans are great to cover the cost of daily expenses, such as ordering inventory or paying employees. However, they are not appropriate for major business transformations.
Choose an institution with experience in business loans for alternative businesses. Your credit score is important. Your chances of getting a favorable loan deal are greater if you have a higher credit score.
Peer-to-peer lending is another alternative financing model for small companies. Peer-to-business lenders provide small businesses loans from multiple investors, similar to crowdfunding. This option is particularly beneficial for small companies that do not have collateral.