If you’re a small business owner seeking a working capital loan to help your business get going, there are many alternatives you can consider. One of them is SBA 7(a) term loans and unsecured working capital loans. Alternative financing models may also be available to finance your small-sized business.
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SBA 7(a), term loans
If you are a small company owner in need of working capital, you should consider applying for SBA 7(a) term loans. These loans are flexible and can be used for a variety of reasons. The money can be used to refinance debt, expand your business or even purchase assets.
The SBA guarantees a portion of the loan which means lenders are less likely to default. However, a fee is payable to guarantee the loan. This fee is usually 3.75 percent of the guaranteed amount of the loan.
The SBA website provides a comprehensive explanation of the SBA 7 (a) loan. They can also access the SBA Lender Match Tool, which matches applicants with lenders that have been approved within two days.
Like all loans, the interest rates for 7(a) loans will differ dependent on the amount and the repayment conditions. It is either fixed or variable and pegged to the Prime rate.
To be eligible for an SBA 7(a) loan you must fill out an application form and get it approved. The lender will then look over your financial situation and review your business plan. After approval, you will sign a loan contract to receive the loan funds.
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Unsecured working capital loans
If you’re just starting out or expanding, an unsecured working capital loan is a wise financial decision. It can be used to finance expansion, equipment, or to upgrade your building among other things. The right option will make your business grow.
A working capital loan is much simpler than you think. It is possible to get a loan with just one page, unlike the line credit. You can even fund your loan with 3 months of business bank statements.
Unsecured loans have higher interest rates. This is due to the fact that the lender assumes greater risk. Therefore an owner of a business must have a great credit score to be able to qualify. Additionally, you must have a plan in place to repay the loan in a timely manner.
Unsecured working capital loans can be an excellent method for your company to bridge short-term financial gaps. You can get low prices on the most important products or upgrades to your facilities through working capital loans. Getting a working capital loan will enable you to keep your business running even during difficult economic times.
A working capital loan that is unsecured is another benefit because it doesn’t require the pledge of any of your assets. Most lenders will require a payment processor and a deposit account.
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Alternative finance models for small-sized businesses
Many entrepreneurs are choosing alternative financing models for small businesses as their preferred option. These flexible financing options can give you the funds you require for growth.
Alternative loans are also more affordable than traditional ones. Banks typically require large down-payments and you may have to wait a while before getting the money you require.
Other alternatives to business loans include lines of credit, invoice discounting, credit cards and cash advances for merchants. These options can help you quickly obtain funding.
Business credit lines are similar to credit cards, with the exception that they charge interest only on money you withdraw. These are useful for short-term expenses.
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Working capital loans are useful for day-to-day costs like paying employees or ordering inventory. However, they aren’t the an ideal solution for large-scale business transformations.
Choose a lender with experience in business loans for alternative businesses. Also, consider your credit score. The better your score, the higher your chances of securing an attractive financing deal.
Peer-to peer lending is another alternative finance option for small-sized companies. Similar to crowdfunding, peer-to-business lenders offer small businesses loans from multiple investors. This option is particularly beneficial for small businesses that do not have collateral.