If you’re a small-scale business owner seeking a working capital loan in order to get your business going there are plenty of alternatives you can take into consideration. These include SBA 7(a) and term loans and unsecured capital loans. You may also consider looking into alternative financing models that could be used to finance your small-scale business.
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SBA 7(a) and term loans
SBA 7(a) or term loans are available to small-scale entrepreneurs who require working capital. These are loans that are extremely flexible that can be used for a variety of purposes. The money can be used to repay loans, expand your business or even purchase assets.
The SBA guarantees a portion of the loan so lenders are less likely to default. However, a fee is payable to guarantee the loan. This is typically 3.75% of the loan’s guarantee amount.
The interested parties can get more information about the SBA 7(a) loan by visiting the SBA website. They will also be able to access the SBA Lender Match Tool, which connects applicants with approved lenders within two days.
As with all loans the interest rate on a 7(a) loan will depend on the amount and the terms of repayment. It can be variable or fixed or tied 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 look over your financial records and evaluate 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
Whether you are starting out or expanding, a non-secure working capital loan could be an investment that is financially sound. It can be used to finance equipment, expansion, or to improve your building among other things. The right choice will allow your business to grow.
It can be much easier than you might consider to obtain a capital loan. Unlike a line of credit it is possible to get an advance with just a single application. You can even fund your loan with 3 months of business bank statements.
Unsecured loans have higher interest rates. This is due to the fact that the lender is taking on more risk. In this regard the business owner should have a high credit rating to qualify. You must also have a plan for repaying the loan on time.
Unsecured working capital loans can be a great way to bridge a short-term financial gap in your company. With a working capital credit, you can take advantage of low rates on key products and upgrades to your facilities. A working capital loan can help you to keep your company afloat in difficult economic times.
Another benefit of having an unsecure working capital loan is that you do not have to pledge any of your assets. The lenders will usually ask for the services of a payment processor and a deposit account.
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Small-scale businesses have other financing options
Alternative finance models for small businesses are fast becoming the preferred choice for many entrepreneurs. They offer flexible financing solutions that will give you the money you need to grow.
Alternative loans are also less expensive than traditional ones. Banks typically require large down payments and you may need wait for a while before you can get the money you need.
Lines of credit, merchant cash advances, invoice discounting, credit card and credit cards are all options for business loans. These options can allow you to quickly get funding.
Business lines of credit work in the same way as credit cards but charge interest only on the money that you take out. These are particularly useful to cover short-term expenses.
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Working capital loans can be beneficial for everyday expenses for example, paying employees or placing orders for inventory. They’re not the ideal solution for large-scale transformations of businesses.
If you are choosing a lender to get an alternative business loan, make sure you choose a business with years of experience. Also, consider your credit score. The more impressive your score, greater your chances of getting the best financing deal.
Peer-to-peer lending is a different financing option for small businesses. Similar to crowdfunding, peer-to business lenders offer small businesses loans from several investors. This option is particularly useful for small businesses who do not have collateral.