If you are a small business owner seeking a working capital loan in order to start your business there are many alternatives you can take into consideration. Some of these options include SBA 7(a) term loans and 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 extremely flexible loans that can be used for a variety of purposes. The funds can be used to repay debt, expand your business or purchase assets.
The SBA guarantees a portion of the loan to make it less likely that lenders will default. The guarantee comes with a cost. This fee is typically 3.75% of the guaranteed amount of the loan.
The SBA website offers a comprehensive explanation of the SBA 7 (a) loan. They will also be able access the SBA Lender Match Tool, which connects applicants to lenders with approval within two days.
Like most loans, the interest rate on a 7(a) loan will depend on the amount and the repayment terms. It is either fixed or variable and can be tied to the Prime rate.
You’ll need to fill out an application to apply for an SBA 7(a) loan. A lender will review your financial history and assess your business plan. After approval, you will sign a loan agreement and receive the loan funds.
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Unsecured working capital loans
No matter if you’re just beginning or expanding, a non-secure working capital loan is an ideal financial decision. It can be used to fund equipment, expansion, or to upgrade your building among other things. The right option will help your business thrive.
The process of getting a working capital loan is much easier than you think. A loan can be obtained by filling out a single page, unlike a line credit. You could even use 3 months of bank statements from your company to pay for your loan.
Unsecured loans carry higher interest rates. This is due to the fact that the lender takes a greater risk. Therefore the business owner must have a good credit rating to qualify. Additionally, you must have a plan in place to repay the loan on time.
Unsecured working capital loans are an excellent way for your business to cover short-term financial gaps. You can find low rates on essential products or upgrades to your facilities with working capital loans. A working capital loan will allow you to keep your business in business during difficult economic times.
Another benefit of an unsecured working capital loan is the fact that you do not need to pledge any of your assets. The lenders will usually ask for an online payment processor and deposit account.
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Small businesses have other financing options
Many entrepreneurs are choosing alternative financing models for small-sized businesses as their preferred option. They provide flexible financing solutions that can help you get the cash you need to expand.
Alternative loans can be more affordable than conventional ones. Banks typically require huge down payments and you may need to wait a while before they are able provide the money you need.
Other alternatives to business loans include lines of credit, invoice discounting, credit card, and cash advances from merchants. Each of these options gives you the opportunity to obtain funds quickly and easily.
Business credit lines are similar to credit cards, but they charge interest only on money you take out. These options are especially useful for expenses that are short-term.
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Working capital loans can be helpful for day-to-day expenses like paying employees or placing orders for inventory. They’re not the ideal solution for large-scale transformations of businesses.
Be sure to choose a lender who has expertise in business loans for alternative businesses. Your credit score is also important. The more impressive your score, higher your chances of securing an attractive financing deal.
Peer-to-peer lending is another alternative financing option for small businesses. Peer-to business lenders provide small businesses loans through many investors, similar to crowdfunding. This option is especially useful for small businesses that don’t have access to collateral.