If you are an owner of a small-sized business seeking a working capital loan in order to get your business off the ground there are plenty of options that you may consider. These include SBA 7(a) or term loans as well as unsecured work capital loans. Alternative financing models could be available to help finance your small business.
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SBA 7(a) term loans
SBA 7(a) and term loans are available to small entrepreneurs who require working capital. These loans are flexible and can be used for a variety of purposes. You can use the funds to refinance debt, expand your business, or for purchasing assets.
The SBA guarantees some of the loan which means lenders are less likely to default. However, a fee is charged to guarantee the loan. This is usually 3.75 percent of the guaranteed amount of the loan.
The SBA website offers a comprehensive explanation of the SBA 7 (a) loan. They will also have access to the SBA Lender Match tool, which matches applicants with SBA-approved lenders in just two days.
As with most loans, the interest rate for a 7(a) loan will be contingent on the amount and repayment terms. It can be variable, fixed or tied 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 look over your financial information and analyze your business plan. After the 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 unsecure working capital loan is an investment that is financially sound. It can be used to purchase equipment or expand your business or to upgrade your building. The right option will allow your business to grow.
The process of getting a working capital loan can be much simpler than you think. A loan can be obtained by filling out a single page, unlike a line credit. You can even use three months of bank statements from your business to finance your loan.
Unsecured loans have higher interest rates. This is due to the fact that the lender takes on greater risk. To qualify, a business owner must have good credit ratings. Additionally, you must have a plan to repay the loan on time.
Unsecured working capital loans can be a great option to bridge a financial gap in your company. With a working capital credit, you can take advantage of low rates on key products and upgrades to your facilities. A working capital loan will allow you to remain in business even during difficult economic times.
An unsecured working capital loan also has a benefit: it doesn’t require the pledge of any of your assets. The lenders will usually ask for an electronic payment processor as well as a deposit account.
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Smaller businesses have other financing options
Alternative financing models for small-sized businesses are fast becoming the preferred option for many entrepreneurs. These flexible financing options can provide you with the funds you require for growth.
Alternative loans are also less expensive than traditional ones. Banks typically require large down-payments, and you may have to wait a few months before you can secure the money you need.
Lines of credit, cash advances for merchants, invoice discounting, credit card and credit cards are all options for business loans. These options all offer you the chance to get funding quickly and easily.
Business lines of credit work exactly the same way as credit cards, but charge interest only for money that you take out. These types of credit can be especially useful for spending on short-term expenses.
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Working capital loans can be helpful for day-to-day expenses for things like paying employees or purchasing inventory. They’re not the ideal solution for large-scale transformations of businesses.
Make sure to choose a lender who has expertise in business loans for alternative businesses. Your credit score is important. The higher your score, the greater your chances of getting a favorable financing deal.
Peer-to -peer lending is an alternative method of financing for small companies. Similar to crowdfunding, these peer-to-business lenders provide small businesses with loans from several investors. This option is particularly useful for small companies that do not have collateral.