If you’re an owner of a small-sized business seeking a working capital loan to start your business there are plenty of options to consider. One of them is SBA 7(a) term loans and non-secured working capital loans. Alternative financing models could be available to help finance your small business.
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SBA 7(a) and term loans
SBA 7(a) (term) loans are available to small-scale business owners who require working capital. They are extremely flexible loans that can be used for a variety of purposes. You can use the money for refinancing debt, expanding your business, or even purchasing assets.
The SBA guarantees some of the loan so lenders are less likely to default. However, a fee is paid for the guarantee. The fee is usually 3.75 percent of the guarantee amount of the loan.
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 lenders approved by the SBA within two days.
Like most loans, the interest rate on a 7(a) loan will depend on the amount and the repayment terms. It is either variable or fixed and can be pegged to the Prime rate.
To be eligible for an SBA 7(a) loan, you will need to fill out an application and have it approved. A lender will then review your financial history and evaluate your business plan. After the approval, you’ll sign a loan agreement and receive the loan funds.
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Unsecured working capital loans
No matter if you’re just beginning or expanding, an unsecured capital loan is an ideal financial decision. It can be used to purchase equipment or expand your business or even to upgrade your facility. The right choice will help your business grow.
It is much simpler than you consider to obtain a capital loan. The loan can be secured on a single form unlike the line credit. You can even use 3 months of bank statements from your company to fund your loan.
Unsecured loans carry higher interest rates. This is because the lender takes on more risk. As such the business owner must have a good credit rating to qualify. You should also have a plan to repay the loan on time.
Unsecured working capital loans are an excellent method for your business to bridge short-term financial gaps. You can obtain low prices on essential products or upgrades to your facilities through a working capital loan. A working capital loan will allow you to keep your company afloat in difficult economic times.
An unsecured working capital loan has another advantage: it doesn’t require the pledge of any of your assets. The lenders will usually ask for an online payment processor and deposit account.
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Alternative financing models for small-sized companies
Alternative finance models for small-sized businesses are fast becoming the preferred option for many entrepreneurs. They offer flexible financing options that can give you the cash you need to expand.
Alternative loans are also cheaper than traditional ones. Banks typically require large down payments and you may need to wait a while before you can obtain the cash you require.
Lines of credit, merchant cash advances, invoice discounting, credit card, and credit cards are all options for business loans. All of these options offer you a way to obtain funding quickly and easily.
Business lines of credit function in the same way as credit cards, but charge only interest on the amount that you withdraw. These types of credit can be especially useful for 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. However, they aren’t the suitable for large-scale business transformations.
If you are choosing a lender to get an alternative business loan, make sure you choose a business that has experience. Your credit score is also important. Your chances of getting a favorable financing deal are greater if you have a higher credit score.
Peer-to peer lending is another alternative financing model for small businesses. Peer-to-business lenders offer loans to small businesses from multiple investors, much like crowdfunding. This option is particularly beneficial for small businesses that do not have collateral.