If you’re an owner of a small-sized business seeking a working capital loan in order to start your business there are plenty of options you could take into consideration. These include SBA 7(a) as well as term loans and unsecured work capital loans. You may also consider looking at alternative financing options that can 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-scale business owners who need working capital. These are loans that are extremely flexible that can be utilized for a variety of purposes. The funds can be used to refinance debt, expand your business, or buying assets.
The SBA guarantees a portion of the loan so lenders are less likely to default. The guarantee comes with a cost. The fee is typically 3.75% of the loan’s guarantee amount.
Anyone interested can gain an understanding of the SBA 7(a) loan by looking through the SBA website. They can also access the SBA Lender Match Tool, which connects applicants with lenders that have been approved within two days.
Like all loans, the rates of interest on 7(a) loans can vary dependent on the amount and the repayment terms. It can be fixed, variable or tied to the Prime Rate.
You’ll have to fill out an application form to be eligible for an SBA 7(a), loan. The lender will go over your financial history and assess 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
When you’re starting out or expanding, an unsecured capital loan could be an ideal financial decision. It can be used to fund equipment, expansion or to upgrade your building among other things. The right type of loan can help your business grow.
It’s a lot easier than you think to obtain a working capital loan. A loan can be obtained with just one page unlike a line credit. You can even use three months of bank statements from your business to pay for your loan.
Unsecured loans are characterized by higher interest rates. This is because the lender takes on greater risk. As such the business owner must have a great credit score in order to be eligible. You must also have a plan to repay the loan on time.
Unsecured working capital loans are a fantastic solution to bridge a financial gap in your company. You can get low prices on key products or upgrades to your facilities using working capital loans. A working capital loan will enable you to keep your business running even during difficult economic times.
Another great thing about an unsecured working capital loan is the fact that you do not have 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
Alternative financing models for small-sized businesses are fast becoming the preferred option for many entrepreneurs. They offer flexible financing options that can give you the money you need to expand.
Alternative loans are also more affordable than traditional loans. Banks will typically require large down payments and you could require a few days before they are able to provide the money you need.
Some other alternatives for business loans include lines of credit, invoice discounting, credit cards, and cash advances from merchants. All of these options give you a way to obtain quick and easy funding.
Business credit lines are similar to credit cards in that they charge interest only on cash you withdraw. These are useful for spending on short-term expenses.
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Working capital loans are useful for day-to-day costs like paying employees or placing orders for inventory. They are not the best option for large-scale business changes.
Make sure to choose a lender who has expertise in alternative business loans. Also, think about your credit score. Your chances of getting a favorable loan deal are better if have a higher credit score.
Other alternative finance models for small businesses are peer-to peer lending. Peer-to business lenders provide small businesses with loans from many investors, similar to crowdfunding. This option is especially useful for small businesses that do not have collateral.