There are a myriad of options for small-scale entrepreneurs looking for working capital loans to help them get their business off the ground. Some of these include SBA 7(a) term loans as well as unsecure working capital loans. You might also look 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) (term) loans are available to small-scale business owners who need working capital. These loans are flexible and can be used for numerous reasons. The money can be used to refinance debt, expand your company, or purchase assets.
The SBA guarantees a portion of the loan to make it less likely that lenders will default. However, a fee is payable for the guarantee. The fee is typically 3.75 percent of the loan’s guaranteed amount.
Anyone interested can gain more information about the SBA 7(a) loan by visiting the SBA website. 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 depend on the amount and repayment terms. It could be variable, fixed or linked to the Prime Rate.
To apply for an SBA 7(a) loan, you will need to fill out an application form and be approved. A lender will then assess your financial history and evaluate your business plan. Once you have been approved, you 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, a non-secure working capital loan could be an ideal financial decision. It can be used to pay for expansion, equipment, or to upgrade your building among other things. The right option will help your business thrive.
A working capital loan could be much easier than you think. In contrast to a line of credit you can obtain a loan by filling out a simple application. You can even fund your loan by using 3 months of business bank statements.
Unsecured loans carry higher interest rates. This is due to the fact that the lender is taking on more risk. Therefore an owner of a business should have a high credit score to be able to qualify. Also, you should have a plan for repaying the loan on time.
Unsecured working capital loans are an excellent option for your company to bridge short-term financial gaps. With a working capital loan you can avail of lower prices on essential products and improvements to your facilities. A working capital loan will enable you to stay in business even during difficult economic times.
An unsecure working capital loan is another benefit because it doesn’t require the pledge of any assets. Typically lenders will require an online payment processor and an account for deposit.
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Alternative financing models for small-sized companies
Many entrepreneurs are opting for alternative finance models for small businesses as the most preferred option. They provide flexible financing options that can provide you with the cash you need to grow.
Alternative loans can also be less expensive than conventional ones. Banks usually require large down payments, and you might be waiting a long time before they can provide the money you need.
Lines of credit, merchant cash advances, invoice discounting, credit card, and credit cards are all options for business loans. All of these options offer you the chance to get funding quickly and easily.
Business lines of credit function similar to credit cards, but charge interest only on the money that you withdraw. These are useful for short-term expenses.
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Working capital loans are a great option for everyday expenses such as ordering inventory or paying employees. However, they’re not an appropriate for major business changes.
If you are choosing a lender to get an alternative business loan, ensure you select a company with experience. Also, take into consideration your credit score. The more impressive your score, better your chances of receiving a favorable financing deal.
Other alternative financing options for small-sized businesses include peer-to-peer lending. Similar to crowdfunding and peer-to-business, peer-to-business lenders provide small businesses with loans from several investors. This option is especially useful for small-sized businesses that do not have access to collateral.