If you’re an owner of a small-sized business seeking an working capital loan to get your business off the ground there are many options to look into. These include SBA 7(a), term loans and unsecured work capital loans. You may also consider looking at alternative financing options that could be used to help finance your small-scale business.
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SBA 7(a) term loans
SBA 7(a) (term) loans are available to small business owners who need working capital. These loans are flexible and are able to be used for many reasons. You can use the funds for refinancing debt, expanding your business, or even purchasing assets.
The SBA guarantees a portion of the loan to make it less likely that lenders default. The guarantee is accompanied by a fee. The fee is usually 3.75% of the guaranteed amount of the loan.
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 matches applicants to SBA-approved lenders within two days.
Like most loans, the interest rate for a 7(a) loan will depend on the amount and the terms of repayment. It is either variable or fixed and tied to the prime rate.
To be eligible for an SBA 7(a) loan, you will need to complete an application and be approved. The lender will go over your financial information and analyze your business plan. Once you have been approved, you sign a loan agreement to receive the loan funds.
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Unsecured working capital loans
If you’re just starting out or expanding, an unsecured capital loan could be an excellent financial choice. It can be used to finance equipment, expansion, or to upgrade your building among other things. The right choice will help your business thrive.
It’s a lot easier than you might consider to obtain a capital loan. A loan can be obtained by filling out a single page, unlike a line credit. You can even pay for your loan using three months of bank statements from your business.
Unsecured loans carry higher interest rates. This is due to the fact that the lender takes a greater risk. As such the business owner must have a strong credit score to be able to qualify. You must also have a plan for repaying the loan in a timely manner.
Unsecured working capital loans are an excellent option for your company to bridge short-term financial gaps. By taking a working capital loan you can take advantage of low prices on key products and upgrades to your facilities. A working capital loan will allow you to keep your business in business during tough economic times.
Another benefit of having an unsecured working capital loan is the fact that you don’t have to pledge any of your assets. Typically lenders will request the payment processor’s URL and the deposit account.
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Small-scale businesses have additional financing options
Many entrepreneurs are opting for alternative finance models for small-sized companies as their preferred choice. These flexible financing options can provide you with the cash you need to fund expansion.
Alternative loans are also more affordable than traditional ones. Banks usually require large deposits, and you may have wait for a while before you can secure the money you need.
Alternative business loan options include lines of credit, invoice discounting, credit cards, and merchant cash advances. These options can help you quickly receive funding.
Business lines of credit function similar to credit cards but charge interest only for money that you take out. These options are especially useful for short-term expenditures.
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Working capital loans can be helpful for day-to-day expenses like paying employees or purchasing inventory. However, they’re not the appropriate for major business transformations.
When selecting a lender for an alternative business loan, make sure you work with a company with experience. Also, think about your credit score. The higher your score, the higher your chances of securing a favorable financing deal.
Other alternative finance models for small-sized businesses include peer-to-peer lending. Peer-tobusiness lenders offer small businesses loans from many investors, similar to crowdfunding. This is particularly useful for small businesses that don’t have access to collateral.