If you’re a small business owner looking for a working capital loan to get your business going there are many options you could think about. Some of these include SBA 7(a) term loans and unsecured working capital loans. You might also look into alternative financing models that can be used to finance your small business.
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SBA 7(a) and term loans
SBA 7(a) or term loans are available to small-scale business owners who require working capital. These are highly flexible loans that can be utilized for a variety of purposes. The funds can be used to refinance the company’s debt, grow it or even purchase assets.
The SBA guarantees a part of the loan to make it less likely that lenders will default. However, a fee will be due to guarantee the loan. The cost 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 also have access to the SBA Lender Match tool, which matches applicants with SBA-approved lenders within two days.
Like all loans, the interest rates for 7(a) loans will differ in accordance with the amount borrowed and the repayment conditions. It could be fixed, variable or linked to the Prime Rate.
You’ll need to submit an application to apply for an SBA 7(a) loan. The lender will go over your financial history and review your business plan. After approval, you will sign a loan agreement and 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 excellent financial choice. It can be used to purchase equipment or expand your business or to upgrade your building. The right type of loan will make your business grow.
A working capital loan could be a lot easier than you think. Contrary to a line-of-credit you can obtain a loan with a one-page application. You can even fund your loan using 3 months of bank statements from your business.
Unsecured loans are more expensive in terms of interest rates. This is because the lender takes on a greater risk. As such an owner of a business should have a high credit score to be eligible. It is also essential to have a plan for repaying the loan on time.
Unsecured working capital loans are a great option to fill a financial gap in your business. With a working capital loan allows you to take advantage of lower prices on essential products and upgrades to your facilities. A working capital loan will enable you to stay in business during tough economic times.
An unsecured working capital loan offers another advantage: you don’t have to pledge any of your assets. Typically lenders will request an online payment processor and a deposit account.
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Alternative financing models for small businesses
Alternative financing models for small businesses are fast becoming the preferred option for many entrepreneurs. These flexible financing options can provide you with the cash you need for expansion.
Alternative loans are also more affordable than conventional ones. Banks typically require substantial down payments and you could be waiting a long time before they are able provide the money you need.
Lines of credit, merchant cash advances as well as invoice discounting card and credit cards are all options for business loans. These options can help you quickly obtain funding.
Business lines of credit are similar to credit cards, with the exception that they charge only interest on the cash you withdraw. These are useful for spending on short-term expenses.
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Working capital loans can be useful for everyday expenses such as ordering inventory or paying employees. They are not the ideal option for large-scale business changes.
If you are choosing a lender to get an alternative business loan, make sure you choose a business with expertise. Your credit score is also crucial. Your chances of getting a favorable finance deal are greater if you have a better credit score.
Peer-to-peer lending is a different method of financing for small businesses. Peer-tobusiness lenders offer small businesses with loans from several investors, similar to crowdfunding. This is especially beneficial for small businesses that do not have collateral.