If you are a small-scale business owner looking for an investment loan to start your business there are plenty of options that you may think about. One of them is SBA 7(a) term loans and working capital loans that are not secured. You may also consider looking into alternative financing models that could be used to finance your small-scale business.
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SBA 7(a) term loans
SBA 7(a) (term) loans are available to small business owners who require working capital. They are extremely flexible loans that can be used for a variety of uses. The funds can be used to refinance debt, grow your business, or even purchasing assets.
The SBA guarantees a part of the loan to reduce the likely that lenders fail. However, a fee will be due for the guarantee. The cost is usually 3.75% of the loan’s guaranteed amount.
The interested parties can get an understanding of the SBA 7(a) loan by looking through the SBA website. They can also access the SBA Lender Match Tool, which matches applicants with lenders that have been approved within two days.
As with all loans, the interest rate for a 7(a) loan will depend on the amount and the repayment terms. It can be fixed or variable and pegged to the Prime rate.
To apply for an SBA 7(a) loan, you will need to submit an application and be approved. The lender will look over your financial information and analyze your business plan. After the approval, you will sign a loan contract and receive the loan funds.
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Unsecured working capital loans
An unsecured working capital loan is a wise financial choice regardless of whether you are expanding or just starting out. It can be used to finance equipment, expansion, or to improve your building among other things. The right choice can help your business grow.
It can be much easier than you think to obtain a working capital loan. It is possible to get a loan on a single form unlike a line credit. You could even use 3 months of bank statements from your company to finance your loan.
Unsecured loans have higher interest rates. This is due to the fact that the lender takes on greater risk. As such the business owner should have a high credit rating to qualify. You must also have a plan for repaying the loan on time.
Unsecured working capital loans can be a great way for your business to bridge short-term financial gaps. With a working capital credit you can avail of low rates on key products and improvements to your facilities. Getting a working capital loan can allow you to stay in business in tough economic times.
An unsecure working capital loan also has a benefit: you don’t have to pledge any assets. The lender will usually require an electronic payment processor as well as a deposit account.
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Small-scale businesses have additional financing options
Alternative financing models for small businesses are fast becoming the preferred option for many entrepreneurs. They offer flexible financing options that can provide you with the funds you need to expand.
Alternative loans can be more affordable than conventional ones. Banks typically require large down payments and you might have to wait a few months before getting the money you require.
Other alternatives to business loans include lines of credit, invoice discounting, credit cards and cash advances from merchants. Each of these options gives you a way to obtain funds quickly and easily.
Business lines of credit function similarly to credit cards, but they charge interest only on money that you withdraw. These types of credit are particularly beneficial to cover short-term expenses.
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Working capital loans are great for everyday expenses like purchasing inventory or paying employees. They are not the best solution for large-scale transformations of businesses.
If you are choosing a lender to get an alternative business loan, make sure you choose a business with expertise. Also, take into consideration your credit score. The better your score, the more likely you are to receive an attractive financing deal.
Peer-to-peer lending is a different finance option for small-sized businesses. Similar to crowdfunding and peer-to-business, peer-to-business lenders provide small businesses with loans from multiple investors. This is especially beneficial for small companies that do not have collateral.