If you’re an owner of a small business looking for a working capital loan to start your business, there are many alternatives you can take into consideration. Some of these options include SBA 7(a) term loans and unsecure working capital loans. Alternative financing models could be available to finance your small business.
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SBA 7(a) and term loans
SBA 7(a) (term) loans are available to small business owners who require working capital. These loans are flexible and are able to be used for many reasons. The funds can be used for refinancing debt, expanding your business, or buying assets.
The SBA guarantees the loan in part to ensure that lenders are less likely to default. The guarantee is accompanied by a fee. This is usually 3.75% of the guaranteed amount of the loan.
Interested parties can get an understanding of the SBA 7(a) loan by visiting the SBA website. They will also be able to access the SBA Lender Match Tool, which matches applicants with lenders that have been approved within two days.
Similar to most loans, interest rates for 7(a) loans will differ depending on the amount and the repayment terms. It can be fixed or variable and pegged to the prime rate.
To apply for an SBA 7(a) loan, you will need to fill out an application form and get it approved. A lender will then review your financial situation and review your business plan. Once you have been approved, you sign a loan contract to receive the loan funds.
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Unsecured working capital loans
An unsecured working capital loan is a wise financial decision, regardless of whether you are expanding or starting out. It can be used to fund equipment, expansion or to upgrade your building, among other things. The right option will allow your business to grow.
It’s much easier than you think to get a working capital loan. As opposed to a credit line you can obtain a loan with a one-page application. You could even use 3 months of bank statements from your business to finance your loan.
Unsecured loans are more expensive in terms of interest rates. This is because the lender is taking on more risk. In this regard, a business owner must have a strong credit score in order to be eligible. Also, you should have a plan to repay the loan in a timely manner.
Unsecured working capital loans are a great option to bridge a financial gap in your business. You can enjoy low costs for key products or improvements to your facilities by using working capital loans. A working capital loan will enable you to remain in business during tough economic times.
An unsecure working capital loan is another benefit because you don’t need to pledge any assets. Typically lenders will require an online payment processor and the deposit account.
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Small-scale businesses have other financing options
Alternative finance models for small-sized companies are quickly becoming the preferred option for many entrepreneurs. They provide flexible financing options that can help you get the money you need to expand.
Alternative loans are also more affordable than traditional loans. Banks usually require large deposits and you may have to wait a few months before you can get the money you require.
Some alternative business loan options include lines of credit invoice discounting, credit cards and cash advances for merchants. These options all offer you the opportunity to obtain funds quickly and easily.
Business credit lines are similar to credit cards in that they charge interest only on the cash you withdraw. These options are especially beneficial to cover short-term expenses.
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Working capital loans are useful for day-to-day costs, such as paying employees or ordering inventory. However, they’re not an appropriate for major business transformations.
Make sure to choose a lender who has expertise in business loans for alternative businesses. Also, consider your credit score. The more impressive your score, better your chances of receiving a favorable financing deal.
Other alternative models for financing small-sized businesses include peer-to-peer lending. Peer-to business lenders provide small businesses loans through many investors, similar to crowdfunding. This option is especially useful for small businesses that do have collateral.