If you are a small business owner looking for a working capital loan to get your business going there are plenty of options to think about. Some of these include SBA 7(a) term loans and unsecured working capital loans. Alternative financing models could be available to finance your small business.
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SBA 7(a) and term loans
If you are a small business owner and are in need of working capital, you should consider applying for SBA 7(a) term loans. These loans are flexible and can be used for many purposes. The money can be used to refinance the company’s debt, grow it, or purchase assets.
The SBA guarantees a portion of the loan to ensure that lenders are less likely to default. The guarantee comes with a fee. The fee is typically 3.75 percent of the loan’s guarantee amount.
The SBA website offers a comprehensive explanation of the SBA 7 (a) loan. They will also be able to access the SBA Lender Match Tool, which connects applicants with approved lenders within two days.
Like most loans, the interest rates on 7(a) loans will differ depending on the amount and repayment conditions. It can be fixed or variable and linked to the prime rate.
To apply for an SBA 7(a) loan you must submit an application and get it approved. The lender will go over 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
If you’re just starting out or expanding, an unsecure working capital loan is an investment that is financially sound. It can be used to buy equipment to expand your business or to upgrade your building. The right option will make your business grow.
It’s much easier than you might consider to obtain a capital loan. Unlike a line of credit you can apply for the loan using a single application. You can even use 3 months of bank statements from your company to finance your loan.
Unsecured loans have higher interest rates. This is due to the fact that the lender takes on more risk. As such the business owner should have a high credit score to be able to qualify. In addition, you should have a plan in place to repay the loan on time.
Unsecured working capital loans can be a great option to bridge a financial gap in your company. With a working capital credit you can avail of discounted prices on important products and improvements to your facilities. A working capital loan can help you to keep your business afloat even in tough economic times.
Another benefit of an unsecure working capital loan is that you don’t have to pledge any of your assets. Most lenders will require an online payment processor and deposit account.
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Alternative finance models for small-sized companies
Many entrepreneurs are turning to alternative financing models for small businesses as their preferred option. These flexible financing options can give you the cash you require for expansion.
Alternative loans are also more affordable than traditional loans. Banks usually require large down-payments and you may have wait for a while before you can obtain the funds you require.
Some other alternatives for business loans include lines of credit invoice discounting, credit cards and merchant cash advances. These options can help you quickly get funding.
Business lines of credit are similar to credit cards, with the exception that they charge only interest on the cash you withdraw. These types of credit are particularly beneficial to cover short-term expenses.
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Working capital loans are useful for everyday expenses like ordering inventory or paying employees. However, they are not appropriate for major business changes.
Choose an institution with experience in alternative business loans. Your credit score is also important. The more impressive your score, more likely you are to receive an attractive financing deal.
Peer-to-peer lending is a different financing option for small companies. Similar to crowdfunding, peer-to business lenders provide small businesses with loans from a variety of investors. This option is especially beneficial for small businesses that do have access to collateral.