If you’re a small-scale business owner seeking a working capital loan to get your business going there are plenty of alternatives you can consider. These include SBA 7(a) or term loans and unsecured capital loans. You may also consider looking at alternative financing options that could be used to help finance your small business.
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SBA 7(a) and term loans
SBA 7(a) (term) loans are available to small business owners who need working capital. These loans are flexible and can be used for numerous reasons. The money can be used to refinance the company’s debt, grow it or to purchase assets.
The SBA guarantees a part of the loan to make it less likely that lenders fail. However, a fee will be paid for the guarantee. This 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 be able to access the SBA Lender Match Tool, which matches applicants with approved lenders within two days.
As with all loans the rate of interest on a 7(a) loan will depend on the amount and the terms of repayment. It can be fixed, variable or linked to the Prime Rate.
You will need to complete an application in order to apply for an SBA 7(a) loan. A lender will then assess your financial situation and review your business plan. After approval, you will 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, a non-secure working capital loan is an ideal financial decision. It can be used to purchase equipment, expand your business, or upgrade your building. The right one will make your business flourish.
It’s a lot easier than you think to obtain a working capital loan. Unlike a line of credit you can apply for an advance with just a single application. You can even fund your loan using three months of business bank statements.
Unsecured loans are characterized by higher interest rates. This is due to the fact that the lender takes on more risk. So an owner of a business must have a strong credit score to be able to qualify. You must also have a plan to repay the loan on time.
Unsecured working capital loans are an excellent way to bridge a short-term financial gap in your company. By taking a working capital loan allows you to take advantage of discounted prices on important products and upgrades to your facilities. A working capital loan can allow you to keep your business running even in difficult economic times.
A working capital loan that is unsecured also has a benefit: you don’t need to pledge any of your assets. Lenders will typically ask for an electronic payment processor as well as a deposit account.
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Small-scale businesses have other financing options
Many entrepreneurs are choosing alternative finance models for small companies as their preferred choice. These flexible financing options can provide you with the cash you need for growth.
Alternative loans can also be cheaper than conventional loans. Banks typically require substantial down payments, and you may have to wait for a while before they can provide the money you require.
Alternative business loan options include lines of credit, invoice discounting, credit cards, and merchant cash advances. These options can help you to quickly receive funding.
Business credit lines are similar to credit cards, except they charge interest only on the money you take out. These types of credit are particularly beneficial for expenses that are short-term.
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Working capital loans can be useful for daily expenses like paying employees or ordering inventory. They are not the best solution for large-scale transformations of businesses.
Make sure to choose an institution with experience in alternative business loans. Your credit score is crucial. The greater your score, the more likely you are to receive the best financing deal.
Peer-to-peer lending is another alternative finance option for small-sized businesses. Similar to crowdfunding, these peer-to-business lenders offer small businesses loans from several investors. This option is especially beneficial for small-sized businesses that do not have collateral.