There are many options for small-scale business owners looking for working capital loans to get their business off the ground. These include SBA 7(a) and term loans and unsecured work capital loans. Alternative financing models could be available to help finance your small business.
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SBA 7(a) term loans
If you are a small-scale company owner in need of working capital, you should consider applying for SBA 7(a) term loans. These are highly flexible loans that can be used for a variety of uses. You can use the money to refinance debt, expand your company, or purchasing assets.
The SBA guarantees a portion of the loan to make it less likely that lenders will default. The guarantee comes with a fee. The fee is usually 3.75 percent of the guaranteed amount of the loan.
The SBA website provides a comprehensive explanation of the SBA 7 (a) loan. They’ll also have access to the SBA Lender Match tool, which matches applicants with SBA-approved lenders in just two days.
Like most loans, the interest rates for 7(a) loans can vary according to the amount and the repayment conditions. It can be fixed, variable, or linked 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 history and review 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 unsecure working capital loan is a smart financial decision regardless of whether you are expanding or just starting out. It can be used to finance expansion, equipment, or to upgrade your building, among other things. The right choice will help your business flourish.
It’s a lot easier than you think to get a working capital loan. A loan can be obtained with just one page unlike a line credit. You can even use 3 months of bank statements from your company to fund your loan.
Unsecured loans come with higher interest rates. This is because the lender takes on more risk. In this regard an owner of a business must have a strong credit rating to qualify. You should also have a plan to repay the loan in a timely manner.
Unsecured working capital loans can be a great option to bridge a financial gap in your company. Using a working capital loan, you can take advantage of low prices on key products and upgrades to your facilities. A working capital loan can allow you to keep your company afloat during tough economic times.
Another benefit of an unsecure working capital loan is the fact that you do not need to pledge any of your assets. Most lenders will require the services of a payment processor and a deposit account.
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Smaller businesses have other financing options
Many entrepreneurs are opting for alternative finance models for small businesses as the most preferred option. They offer flexible financing solutions that can help you get the money you require to expand.
Alternative loans can be cheaper than traditional ones. Banks usually require large deposits and you may have to wait a while before getting the cash you require.
Some other alternatives for business loans include lines of credit, invoice discounting, credit card, and cash advances from merchants. Each of these options gives you the chance to get funds quickly and easily.
Business lines of credit work 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 a great option for everyday expenses such as ordering inventory or paying employees. However, they aren’t the best suited for large-scale business transformations.
Make sure to choose an institution with experience in alternative business loans. Your credit score is crucial. The greater your score, the better your chances of receiving a favorable financing deal.
Peer-to peer lending is another alternative finance option for small-sized businesses. Similar to crowdfunding, peer-to-business lenders offer small businesses loans from a variety of investors. This option is particularly useful for small companies that don’t have collateral.