There are a variety of alternatives available to small-scale business owners seeking working capital loans to get their business off the beginning. A few of these options are SBA 7(a) term loans and working capital loans that are not secured. You may also want to look into alternative financing options that could be used to finance your small business.
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SBA 7(a) term loans
If you are a small-scale business owner and you are in need of working capital, you should consider applying for SBA 7(a) term loans. These loans are flexible and are able to be used for many purposes. You can use the money to refinance debt, expand your company, or purchasing assets.
The SBA guarantees some of the loan which means lenders are less likely to default. However, a fee will be charged for the guarantee. The fee is usually 3.75% of the guaranteed amount of the loan.
The SBA website provides a detailed explanation of the SBA 7 (a) loan. They’ll also have access to the SBA Lender Match tool, which connects applicants with SBA-approved lenders in just two days.
Similar to most loans, interest rates on 7(a) loans will vary dependent on the amount and the repayment conditions. It can be fixed or variable or pegged to the Prime rate.
You’ll need to fill out an application in order to apply for an SBA 7(a) loan. The lender will look over your financial history and review your business plan. After approval, you will sign a loan agreement to receive the loan funds.
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Unsecured working capital loans
Whether you are starting out or expanding, an unsecured working capital loan can be an ideal financial decision. It can be used to purchase equipment, expand your business, or upgrade your building. The right one will make your business flourish.
Getting a working capital loan can be a lot easier than you think. Contrary to a line-of-credit you can apply for an advance with just a single application. You can even pay for your loan with 3 months of bank statements for business.
Unsecured loans come with higher interest rates. This is because the lender takes on more risk. Therefore the business owner must have a strong credit score to be able to qualify. Additionally, you must have a plan to repay the loan on time.
Unsecured working capital loans can be a great way to bridge a short-term financial gap in your business. By taking a working capital loan you can take advantage of low rates on key products and improvements to your facilities. A working capital loan can help you to keep your business afloat during difficult economic times.
Another benefit 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 the payment processor’s link and a deposit account.
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Alternative finance models for small-sized companies
Alternative finance models for small-sized businesses are fast becoming the preferred option for many entrepreneurs. They provide flexible financing solutions that can give you the money you require to expand.
Alternative loans are also more affordable than traditional ones. Banks typically require large down-payments and you may need to wait a while before you can obtain the funds you require.
Lines of credit, merchant cash advances and invoice discounting, credit card, and credit cards are all options for business loans. These options can help you to quickly receive funding.
Business lines of credit work similar to credit cards, but charge interest only on the money that you withdraw. These options are especially useful for expenses that are short-term.
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Working capital loans are a great option for everyday expenses like purchasing inventory or paying employees. However, they are not suitable for large-scale business changes.
When choosing a lender for an alternative business loan, ensure you choose a business that has years of experience. Also, think about your credit score. The more impressive your score, better your chances of receiving favorable financing deals.
Peer-to-peer lending is a different financing model for small companies. Similar to crowdfunding, peer-to-business lenders offer small businesses loans from multiple investors. This is particularly useful for small businesses that do have collateral.