If you’re an owner of a small business looking for an working capital loan to get your business off the ground there are plenty of options to look into. Some of these options include SBA 7(a) term loans as well as working capital loans that are not secured. You may also consider looking at alternative financing options that can be used to help 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 need working capital. These loans are flexible and can be used for a variety of reasons. The funds can be used to refinance debt, expand your company or to purchase assets.
The SBA guarantees a portion of the loan so that lenders are less likely to default. However, a fee will be payable for the guarantee. This is usually 3.75% of the guaranteed amount of the loan.
The SBA website offers a thorough explanation of the SBA 7 (a) loan. They’ll also be able to access to the SBA Lender Match tool, which matches applicants with SBA-approved lenders in just two days.
Like most loans, the rates of interest on 7(a) loans can vary according to the amount and the repayment conditions. It could be fixed, variable or linked to the Prime Rate.
To be eligible for an SBA 7(a) loan you must fill out an application and have it approved. A lender will then review your financial situation and review your business plan. After approval, you will sign a loan contract 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 excellent financial choice. It can be used to purchase equipment to expand your business or to upgrade your building. The right option will make your business grow.
It can be much easier than you imagine to get a capital loan. Contrary to a line-of-credit you can obtain a loan by filling out a simple application. You can even use 3 months of bank statements from your company to fund your loan.
Unsecured loans carry higher interest rates. This is due to the fact that the lender takes a greater risk. Therefore the business owner must have a great credit score to be able to qualify. Also, you should have a plan for repaying the loan in a timely manner.
Unsecured working capital loans are an excellent way to bridge a short-term financial gap in your business. You can obtain low prices on key products or upgrades to your facilities using working capital loans. A working capital loan will allow you to stay in business during tough economic times.
An unsecured working capital loan is another benefit because you don’t have to pledge any of your assets. The lenders will usually ask for a payment processor and a deposit account.
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Smaller businesses have other financing options
Alternative financing models for small businesses are fast becoming the preferred choice for many entrepreneurs. They offer flexible financing solutions that can provide you with the money you require to grow.
Alternative loans are also less expensive than traditional ones. Banks typically require huge down payments and you could be waiting a long time before they can provide the money you require.
Some other alternatives for business loans include lines of credit, invoice discounting, credit cards, and cash advances from merchants. These options can help you to quickly receive funding.
Business lines of credit function similar to credit cards but charge only interest on the amount that you take out. These options can be particularly beneficial for expenses that are short-term.
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Working capital loans can be helpful for day-to-day expenses, such as paying employees or ordering inventory. However, they are not best suited for large-scale business changes.
Be sure to select a lender with experience in business loans for alternative businesses. Your credit score is also important. The higher your score, the higher your chances of securing an attractive financing deal.
Peer-to peer lending is another alternative method of financing for small companies. Similar to crowdfunding, peer-to business lenders provide small businesses with loans from multiple investors. This option is especially useful for small businesses that do not have collateral.