If you’re a small-scale business owner seeking a working capital loan in order to get your business going there are many options that you may think about. These include SBA 7(a) and term loans as well as unsecured work 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 numerous reasons. The funds can be used for refinancing debt, expanding your company, or purchasing assets.
The SBA guarantees a portion of the loan so that lenders are less likely to default. However, a fee will be paid for the guarantee. This fee 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 will also have access to the SBA Lender Match tool, which matches applicants with SBA-approved lenders within two days.
As with most loans, interest rates on 7(a) loans will differ in accordance with the amount borrowed and the repayment conditions. It can be fixed, variable or tied to the Prime Rate.
To apply for an SBA 7(a) loan, you will need to submit an application and get it approved. The lender will then look over 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
A working capital loan that is unsecured is a smart financial decision regardless of whether you are expanding or just starting out. It can be used to buy equipment, expand your business, or even to upgrade your facility. The right one will make your business grow.
It can be much easier than you might imagine to get a capital loan. A loan can be obtained with just one page, unlike a line credit. You can even use three months of bank statements from your business to fund your loan.
Unsecured loans have higher interest rates. This is due to the fact that the lender takes on more risk. To qualify, a business owner must have good credit ratings. It is also essential to have a plan for repaying the loan on time.
Unsecured working capital loans are a great solution to bridge a financial gap in your company. With a working capital loan you can avail of discounted prices on important products and upgrades to your facilities. Getting a working capital loan can allow you to remain in business in tough economic times.
Another advantage of an unsecured working capital loan is the fact that you don’t have to pledge any of your assets. Typically lenders will require the payment processor’s link and an account for deposits.
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Smaller businesses have other financing options
Alternative finance models for small companies are quickly becoming the preferred option for many entrepreneurs. These flexible financing options can provide the cash you need for growth.
Alternative loans are also less expensive than traditional loans. Banks typically require substantial down payments and you may have to wait for a while before they can provide the cash you require.
Some alternative business loan options include lines of credit invoice discounting, credit cards, and cash advances for merchants. All of these options give you a way to obtain quick and easy funding.
Business lines of credit work exactly the same way as credit cards, but charge only interest on the amount that you withdraw. These types of credit are particularly beneficial for short-term expenditures.
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Working capital loans can be useful for everyday expenses such as ordering inventory or paying employees. However, they’re not an appropriate for major business changes.
When selecting a lender for an alternative business loan, ensure you work with a company with experience. Your credit score is also important. The higher your score, the more likely you are to receive an attractive financing deal.
Other alternative models for financing small-sized businesses include peer-to-peer lending. Similar to crowdfunding, these peer-to-business lenders offer small businesses loans from multiple investors. This option is especially beneficial for small businesses that do not have collateral.