There are numerous choices available to small business owners looking for working capital loans to help them get their business off the start. These include SBA 7(a) as well as term loans, and unsecured work capital loans. You may also consider looking into alternative financing models that can be used to help finance your small business.
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SBA 7(a) term loans
SBA 7(a) or term loans are available to small-scale business owners who need working capital. These loans are flexible and are able to be used for many reasons. The money can be used to refinance the company’s debt, grow it or even purchase assets.
The SBA guarantees a portion of the loan to make it less likely that lenders default. However, a fee is charged for the guarantee. This fee is usually 3.75 percent of the guarantee amount of the loan.
Anyone interested can gain more information about the SBA 7(a) loan by looking through the SBA website. They’ll also be able to access to the SBA Lender Match tool, which matches applicants with SBA-approved lenders within two days.
Like most loans, the rate of interest for 7(a) loans will vary dependent on the amount and repayment terms. It could be fixed, variable or linked to the Prime Rate.
You’ll need to fill out an application in order to apply for an SBA 7(a), loan. A lender will then assess your financial history and evaluate your business plan. Once you have been approved, you sign a loan agreement 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 could be a wise financial decision. It can be used to buy equipment or expand your business or even to upgrade your facility. The right type of loan will help your business grow.
It can be much easier than you think to obtain a working capital loan. In contrast to a line of credit, you can get the loan using a single application. You can even fund your loan using three months of bank statements from your business.
Unsecured loans have higher interest rates. This is because the lender takes on a greater risk. As such an owner of a business must have a great credit rating to qualify. Additionally, you must 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 for key products or improvements to your facilities with working capital loans. Getting a working capital loan can allow you to continue to operate in tough economic times.
An unsecure working capital loan is another benefit because it doesn’t require the pledge of any assets. Typically, lenders will ask for an online payment processor and a deposit account.
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Small businesses have other financing options
Alternative financing models for small businesses are fast becoming the preferred option for many entrepreneurs. They provide flexible financing solutions that can give you the funds you need to expand.
Alternative loans are also more affordable than traditional loans. Banks typically require large down payments and you may need to wait a few months before you can secure the funds you require.
Lines of credit, cash advances for merchants, invoice discounting, credit card and credit cards are all options for business loans. All of these options give you the possibility of obtaining quick and easy funding.
Business lines of credit function exactly the same way as credit cards but charge interest only for money that you take out. These are particularly useful to cover short-term expenses.
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Working capital loans are great for everyday expenses such as ordering inventory or paying employees. However, they aren’t the an ideal solution for large-scale business changes.
When selecting a lender for an alternative business loan, make sure you select a company that has expertise. Your credit score is also important. The more impressive your score, higher your chances of securing a favorable financing deal.
Other alternative financing models for small-sized businesses include peer-to-peer lending. Peer-tobusiness lenders offer small businesses loans through multiple investors, similar to crowdfunding. This is especially beneficial for small-sized businesses that don’t have collateral.