If you are an owner of a small-sized business seeking a working capital loan in order to help your business get going there are many options you could take into consideration. Some of these include SBA 7(a) term loans and unsecure working capital loans. Alternative financing models could be available to help finance your small business.
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SBA 7(a) term loans
SBA 7(a), term loans are available to small-scale business owners who need working capital. These are loans that are extremely flexible that can be used for a variety of uses. The funds can be used to refinance debt, expand your business, or for purchasing assets.
The SBA guarantees a part of the loan to make it less likely that lenders fail. However, a fee is due for the guarantee. This fee is usually 3.75% of the loan’s guaranteed amount.
The SBA website offers a comprehensive explanation of the SBA 7 (a) loan. They’ll also have access to the SBA Lender Match tool, which connects applicants with lenders approved by the SBA within two days.
As with all loans, the rate of interest on a 7(a) loan will be contingent on the amount and the terms of repayment. It is either variable or fixed and linked to the Prime rate.
To be eligible for an SBA 7(a) loan you must fill out an application form and have it approved. The lender will look over your financial information and analyze 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
An unsecure working capital loan is a smart financial decision regardless of whether you are expanding or just starting out. It can be used to fund equipment, expansion or to upgrade your building, among other things. The right type of loan will allow your business to grow.
It is much simpler than you consider to obtain a capital loan. Contrary to a line-of-credit you can apply for an advance with just a single application. You can even use 3 months of bank statements from your company to finance your loan.
Unsecured loans are more expensive in terms of interest rates. This is because the lender assumes greater risk. In this regard, a business owner must have a great credit score to be eligible. Also, you should have a plan for repaying the loan on time.
Unsecured working capital loans are a great option to fill a financial gap in your company. With a working capital loan you can take advantage of low prices on key products and improvements to your facilities. A working capital loan can allow you to continue to operate even in difficult economic times.
Another advantage of an unsecure working capital loan is that you do not need to pledge any of your assets. Typically, lenders will ask for an online payment processor and the deposit account.
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Smaller businesses have other financing options
Many entrepreneurs are opting for alternative financing models for small companies as their preferred choice. These flexible financing options can provide you with the cash you require for expansion.
Alternative loans are also more affordable than traditional loans. Banks typically require substantial down payments and you could be waiting a long time before they can provide the funds you require.
Other alternatives to business loans include lines of credit invoice discounting, credit cards, and merchant cash advances. These options can help you quickly get funding.
Business credit lines are similar to credit cards in that they charge interest only on money you take out. These are helpful for short-term expenditures.
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Working capital loans can be beneficial for everyday expenses for example, paying employees or placing orders for inventory. However, they’re not the appropriate for major business changes.
Make sure to choose a lender who has experience in alternative business loans. Your credit score is also crucial. The greater your score, the better your chances of receiving an attractive financing deal.
Peer-to peer lending is another alternative financing option for small businesses. Peer-to-business lenders offer loans to small businesses from many investors, similar to crowdfunding. This option is especially beneficial for small-sized businesses that do not have collateral.