There are a variety of options for small-scale business owners who are looking for working capital loans to get their business off the start. Some of these include SBA 7(a) term loans and unsecured working capital loans. You may also consider looking into 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) or term loans are available to small-scale business owners who require working capital. These are loans that are extremely flexible that can be used for a variety reasons. You can use the funds to refinance debt, grow your business, or buying assets.
The SBA guarantees the loan in part so that lenders are less likely to default. The guarantee comes with a cost. This is typically 3.75 percent of the loan’s guarantee amount.
The SBA website offers a comprehensive explanation of the SBA 7 (a) loan. They can also access the SBA Lender Match Tool, which connects applicants to lenders with approval within two days.
As with all loans the interest rate on a 7(a) loan will be contingent on the amount and repayment terms. It is either variable or fixed and can be tied to the Prime rate.
You’ll have to fill out an application to apply for an SBA 7(a), loan. The lender will then look over your financial situation and review your business plan. After the approval, you sign a loan contract 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 a wise financial decision. It can be used to purchase equipment to expand your business or upgrade your building. The right type of loan will allow your business to grow.
The process of getting a working capital loan could be much easier than you think. As opposed to a credit line you can apply for a loan with a one-page application. You can even fund your loan using three months of bank statements from your business.
Unsecured loans have higher interest rates. This is because the lender takes on greater risk. To be eligible, a company owner must have excellent credit ratings. In addition, you should have a plan to pay back the loan in a timely manner.
Unsecured working capital loans are an excellent method for your business to bridge short-term financial gaps. You can enjoy low costs on the most important products or upgrades to your facilities with working capital loans. A working capital loan can allow you to keep your business running even in tough economic times.
A working capital loan that is unsecured has another advantage: you don’t have to pledge any of your assets. Typically, lenders will ask for a payment processor link and the deposit account.
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Small-scale businesses have additional financing options
Alternative financing models for small-sized businesses are fast becoming the preferred choice for many entrepreneurs. These flexible financing options can give you the funds you require for growth.
Alternative loans are also less expensive than traditional ones. Banks typically require substantial down payments and you could require a few days before they are able 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 all offer you the chance to get funds quickly and easily.
Business lines of credit are similar to credit cards, except they charge interest only on the cash you withdraw. These types of credit can be especially useful for spending on short-term expenses.
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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 best suited for major business changes.
Choose a lender who has experience in alternative business loans. Also, take into consideration your credit score. Your chances of getting a favorable financing deal are increased if you have a better credit score.
Other alternative finance models for small businesses involve peer-to-peer lending. Similar to crowdfunding, peer-to-business lenders offer small businesses loans from multiple investors. This option is particularly beneficial for small businesses who do not have collateral.