If you are an owner of a small-sized business seeking a working capital loan to get your business going, there are many alternatives you can think about. These include SBA 7(a), term loans and unsecured work capital loans. You might also look into alternative financing models that could be used 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 need working capital. These are loans that are extremely flexible that can be used for a variety of uses. The funds can be used to repay loans, expand your business or even 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. This fee is typically 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 be able to access to the SBA Lender Match tool, which connects applicants with SBA-approved lenders in just two days.
As with all loans the interest rate for a 7(a) loan will depend on the amount and the repayment terms. It could be variable, fixed or linked to the Prime Rate.
You’ll need to fill out an application to apply for an SBA 7(a) loan. A lender will then review your financial standing and analyze your business plan. After approval, you will sign a loan agreement and receive the loan funds.
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Unsecured working capital loans
A working capital loan that is unsecured is a wise financial choice regardless of whether you are expanding or just starting out. It can be used to buy equipment to expand your business or to improve your building. The right type of loan will help your business grow.
The process of getting a working capital loan can be much simpler than you think. Unlike a line of credit you can apply for the loan using a single application. You can even pay for your loan using three months of bank statements from your business.
Unsecured loans carry higher interest rates. This is because the lender assumes greater risk. In this regard an owner of a business must have a good credit score to be eligible. It is also essential to have a plan for repaying the loan on time.
Unsecured working capital loans are an excellent method for your business to bridge short-term financial gaps. With a working capital loan, you can take advantage of low prices on key products and improvements to your facilities. A working capital loan can help you to keep your business in business in difficult economic times.
Another benefit of an unsecure working capital loan is the fact that you do not have to pledge any of your assets. The lender will usually require the services of a payment processor and a deposit account.
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Smaller businesses have other financing options
Alternative financing models for small-sized companies are quickly becoming the preferred option for many entrepreneurs. They provide flexible financing options that can provide you with the cash you need to expand your business.
Alternative loans are also more affordable than conventional ones. Banks typically require large down-payments and you may need wait for a while before you can secure the money you require.
Lines of credit, merchant cash advances, invoice discounting, credit card and credit cards are all options for business loans. All of these options give you the opportunity to obtain funds quickly and easily.
Business lines of credit work exactly the same way as credit cards, but they charge interest only for money that you take out. These are useful for spending on short-term expenses.
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Working capital loans are useful for everyday expenses such as ordering inventory or paying employees. They’re not the ideal option for large-scale business changes.
If you are choosing a lender to get an alternative business loan, ensure you select a company that has years of experience. Your credit score is important. The higher your score, the higher your chances of securing an attractive financing deal.
Other alternative models for financing small businesses involve peer-to-peer lending. Peer-to-business lenders offer small businesses loans through several investors, similar to crowdfunding. This is particularly useful for small businesses that don’t have collateral.