If you’re an owner of a small business seeking a working capital loan in order to help your business get going there are many options that you may look into. One of them is SBA 7(a) term loans as well as unsecure working capital loans. You could also look at alternative financing options that could be used to help finance your small business.
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SBA 7(a), term loans
SBA 7(a) (term) loans are available to small-scale business owners who require working capital. These loans are flexible and can be used for numerous purposes. The money can be used to repay debt, expand your company or to purchase assets.
The SBA guarantees a portion of the loan which means lenders are less likely to default. The guarantee comes with a fee. This fee is usually 3.75 percent of the loan’s guarantee amount.
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 matches applicants with SBA-approved lenders within two days.
Like most loans, the interest rates on 7(a) loans will vary dependent on the amount and repayment terms. It can be fixed, variable or linked to the Prime Rate.
You’ll have to fill out an application in order to apply for an SBA 7(a), loan. The lender will review your financial information and analyze your business plan. After approval, you will sign a loan agreement and receive the loan funds.
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Unsecured working capital loans
Whether you are starting out or expanding, an unsecured working capital loan could be an investment that is financially sound. It can be used to purchase equipment or expand your business or upgrade your building. The right type of loan will make your business grow.
A working capital loan is much simpler than you think. Unlike a line of credit you can apply for the loan using a single application. You can even pay for your loan by using 3 months of business bank statements.
Unsecured loans carry higher interest rates. This is because the lender takes on more risk. In this regard, a business owner should have a high credit rating to qualify. You must also have a plan for repaying the loan in a timely manner.
Unsecured working capital loans are an excellent option for your business to cover short-term financial gaps. Using a working capital loan allows you to take advantage of low prices on key products and improvements to your facilities. A working capital loan will help you to keep your company afloat during tough economic times.
Another advantage of an unsecured working capital loan is the fact that you do not need to pledge any of your assets. Typically lenders will ask for an online payment processor and an account for deposit.
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Alternative financing models for small-sized businesses
Many entrepreneurs are turning to alternative financing models for small-sized businesses as their preferred option. They offer flexible financing solutions that can help you get the funds you need to grow.
Alternative loans can also be less expensive than conventional ones. Banks typically require huge down payments and you may have to wait for a while before they can provide the money you require.
Other alternatives to 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 they charge interest only for money that you withdraw. These types of credit can be especially beneficial for expenses that are short-term.
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Working capital loans can be useful for daily costs such as purchasing inventory or paying employees. However, they aren’t the suitable for large-scale business changes.
When choosing a lender for an alternative business loan, ensure you choose a business with prior experience. Your credit score is also important. The higher your score, the higher your chances of securing a favorable financing deal.
Peer-to-peer lending is a different financing model for small companies. Peer-to-business lenders offer loans to small businesses from many investors, similar to crowdfunding. This option is especially beneficial for small businesses that do not have collateral.