If you are a small business owner looking for an working capital loan to get your business going there are plenty of options to think about. These include SBA 7(a), term loans and unsecured capital loans. You may also want to look into alternative financing models that could be used 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-scale entrepreneurs who require working capital. These loans are flexible and are able to be used for many reasons. The funds can be used to repay the company’s debt, grow it or even purchase assets.
The SBA guarantees some of the loan which means lenders are less likely to default. However, a fee is paid to guarantee the loan. This 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 all loans, the interest rates for 7(a) loans can vary according to the amount and the repayment terms. It could be fixed, variable, or linked to the Prime Rate.
To apply for an SBA 7(a) loan you must submit an application and get it approved. The lender will then look over your financial situation and review your business plan. After approval, you’ll sign a loan agreement to receive the loan funds.
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Unsecured working capital loans
An unsecure working capital loan is a wise financial choice regardless of whether or not you are expanding or starting out. It can be used to finance expansion, equipment, or to improve your building, among other things. The right option will make your business thrive.
The process of getting a working capital loan could be much simpler than you think. A loan can be obtained by filling out a single page, unlike a line credit. You can also use 3 months of bank statements from your company to finance your loan.
Unsecured loans come with higher interest rates. This is because the lender assumes greater risk. As such an owner of a business must have a great credit score to be eligible. Also, you should have a plan to repay the loan in a timely manner.
Unsecured working capital loans are an excellent solution to bridge a financial gap in your business. You can enjoy low costs on the most important products or upgrades to your facilities by using working capital loans. Getting a working capital loan will enable you to stay in business even in difficult economic times.
Another benefit of an unsecure working capital loan is that you do not have to pledge any of your assets. Most lenders will require an electronic payment processor as well as a deposit account.
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Small businesses have other financing options
Alternative financing models for small companies are quickly becoming the preferred choice for many entrepreneurs. They offer flexible financing solutions that can provide you with the money you require to grow.
Alternative loans are also less expensive than traditional loans. Banks usually require large deposits and you may need wait for a while before you can obtain the money you need.
Other alternatives to business loans include lines of credit, invoice discounting, credit cards and merchant cash advances. All of these options give you a way to obtain quick and easy funding.
Business credit lines are similar to credit cards, with the exception that they charge only interest on the cash you withdraw. These types of credit are particularly beneficial for expenses that are short-term.
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Working capital loans are useful for day-to-day costs for example, paying employees or purchasing inventory. However, they’re not an best suited for major business transformations.
When selecting a lender for an alternative business loan, ensure you work with a company with expertise. Also, consider your credit score. The greater your score, the more likely you are to receive a favorable financing deal.
Other alternative financing models for small businesses involve peer-to-peer lending. Peer-to-business lenders provide loans to small businesses from many investors, similar to crowdfunding. This option is especially useful for small businesses that do have access to collateral.