If you are an owner of a small business looking for a working capital loan in order to get your business going there are many alternatives you can take into consideration. These include SBA 7(a) or term loans and unsecured work capital loans. Alternative financing models could be available to finance your small business.
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SBA 7(a) term loans
If you are a small business owner and are in need of working capital, you should consider applying for SBA 7(a) term loans. These are loans that are extremely flexible that can be used for a variety reasons. You can use the money for refinancing debt, expanding your business, or for purchasing assets.
The SBA guarantees some of the loan to ensure that lenders are less likely to default. However, a fee is paid for the guarantee. This fee is usually 3.75% of the guaranteed amount of the loan.
The interested parties can get a better understanding of the SBA 7(a) loan by looking through the SBA website. They will also have access to the SBA Lender Match tool, which connects applicants with lenders approved by the SBA within two days.
As with most loans, the rate of interest on a 7(a) loan will depend on the amount and repayment terms. It can be variable, fixed, or tied to the Prime Rate.
To be eligible for an SBA 7(a) loan you must fill out an application and be approved. A lender will then review your financial situation and review 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
An unsecure working capital loan is a smart financial investment regardless of whether or not 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 make your business grow.
It can be much easier than you might think to get a working capital loan. The loan can be secured on a single form, unlike the line credit. You can also use 3 months of bank statements from your business to pay for your loan.
Unsecured loans have higher interest rates. This is because the lender takes a greater risk. To be considered for a loan, a business owner must have excellent credit ratings. In addition, you should have a plan to pay back the loan on time.
Unsecured working capital loans can be a great option to bridge a financial gap in your company. With a working capital loan you can avail of low prices on key products and upgrades to your facilities. A working capital loan will allow you to keep your business afloat even in tough economic times.
A working capital loan that is unsecured offers another advantage: you don’t have to pledge any of your assets. Typically lenders will require an online payment processor and a deposit account.
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Alternative finance models for small businesses
Alternative finance models for small-sized businesses are fast becoming the preferred choice for many entrepreneurs. They offer flexible financing options that can help you get the money you need to expand your business.
Alternative loans are also more affordable than traditional loans. Banks typically require huge down payments and you may be waiting a long time before they are able to provide the money you need.
Some alternative business loan options include lines of credit, invoice discounting, credit cards and cash advances from merchants. These options all offer you the opportunity to obtain quick and easy funding.
Business credit lines are similar to credit cards, except they charge only interest on the money you take out. These options are especially beneficial for expenses that are short-term.
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Working capital loans are great for daily costs such as ordering inventory or paying employees. However, they are not best suited for large-scale business transformations.
When choosing a lender for an alternative business loan, ensure you choose a business that has years of experience. Also, take into consideration your credit score. The higher your score, the higher your chances of securing an attractive financing deal.
Other alternative financing models for small businesses involve peer-to-peer lending. Similar to crowdfunding, these peer-to-business lenders provide small businesses with loans from a variety of investors. This option is especially useful for small businesses that don’t have collateral.