If you’re an owner of a small-sized business looking for an investment loan to get your business going there are plenty of alternatives you can look into. Some of these include SBA 7(a) term loans and unsecure working capital loans. You may also consider looking at alternative financing options that can be used to help finance your small business.
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SBA 7(a) and term loans
If you are a small-scale business owner and you are in need of working capital, you should think about applying for SBA 7(a) term loans. These loans are flexible and are able to be used for many reasons. You can use the money to refinance debt, grow your business, or for purchasing assets.
The SBA guarantees a part of the loan to reduce the likely that lenders default. However, a fee is charged for the guarantee. This fee is usually 3.75 percent of the loan’s guaranteed amount.
The SBA website offers a comprehensive explanation of the SBA 7 (a) loan. They’ll also have access to the SBA Lender Match tool, which connects applicants to SBA-approved lenders within two days.
Similar to most loans, interest rates on 7(a) loans can vary according to the amount and the repayment conditions. It can be fixed, variable or linked to the Prime Rate.
You will need to complete an application form to be eligible for an SBA 7(a), loan. The lender will then look 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
No matter if you’re just beginning or expanding, an unsecure working capital loan is an investment that is financially sound. It can be used to pay for equipment, expansion, or to upgrade your building among other things. The right option will help your business grow.
It’s a lot easier than you might think to obtain a working capital loan. It is possible to get a loan using just one page unlike a line credit. You can even use 3 months of bank statements from your business to finance your loan.
Unsecured loans have higher interest rates. This is due to the fact that the lender is taking on more risk. Therefore, a business owner must have a great credit score to be able to qualify. You should also have a plan to repay the loan in a timely manner.
Unsecured working capital loans are an excellent option to bridge a financial gap in your business. By taking a working capital loan allows you to take advantage of low rates on key products and upgrades to your facilities. A working capital loan can help you to keep your business afloat during difficult economic times.
Another advantage of an unsecure working capital loan is the fact that you do not need to pledge any of your assets. Most lenders will require an online payment processor and deposit account.
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Smaller businesses have other financing options
Many entrepreneurs are turning to alternative finance models for small-sized businesses as the most preferred option. These flexible financing options can provide the cash you need for growth.
Alternative loans are also more affordable than traditional loans. Banks typically require substantial down payments, and you might need to wait a while before they are able provide the money you need.
Lines of credit, cash advances for merchants as well as invoice discounting card and credit cards are all options for business loans. Each of these options gives you a way to obtain money quickly and conveniently.
Business lines of credit function similar to credit cards but charge only interest on the amount that you withdraw. These types of credit can be especially useful for spending on short-term expenses.
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Working capital loans can be useful for everyday expenses like ordering inventory or paying employees. However, they’re not an suitable for major business changes.
If you are choosing a lender to get an alternative business loan, ensure you work with a company that has prior experience. Your credit score is also crucial. The better your score, the greater your chances of getting favorable financing deals.
Peer-to-peer lending is another alternative financing option for small businesses. Similar to crowdfunding, these peer-to-business lenders provide small businesses with loans from a variety of investors. This option is particularly useful for small companies that do not have collateral.