There are a variety of alternatives available to small-scale business owners seeking working capital loans to get their business off the starting point. A few of these options are SBA 7(a) term loans and unsecured working capital loans. Alternative financing models may also be available to help finance your small business.
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SBA 7(a) term loans
If you are a small company owner in need of working capital, you should think about applying for SBA 7(a) term loans. These are highly flexible loans that can be used for a variety of reasons. The funds can be used to repay loans, 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 will be paid to guarantee the loan. This is typically 3.75% of the loan’s guaranteed amount.
The SBA website provides a detailed 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 in just two days.
Like most loans, the interest rate on a 7(a) loan will depend on the amount and the terms of repayment. It could be variable, fixed or linked to the Prime Rate.
To be eligible for an SBA 7(a) loan you must submit an application and get it approved. The lender will review your financial history and review your business plan. After approval, you sign a loan agreement and 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 starting out. It can be used to buy equipment or expand your business or to improve your building. The right one will make your business thrive.
It can be much easier than you might consider to obtain a capital loan. Contrary to a line-of-credit you can obtain a loan with a one-page application. You can even use 3 months of bank statements from your business to finance your loan.
Unsecured loans come with higher interest rates. This is because the lender assumes greater risk. To qualify, a business owner must have excellent credit ratings. Also, you should have a plan for repaying the loan in a timely manner.
Unsecured working capital loans can be a great way to bridge a short-term financial gap in your company. With a working capital loan allows you to take advantage of discounted prices on important products and improvements to your facilities. A working capital loan will enable you to remain in business in tough economic times.
An unsecure working capital loan also has a benefit: you don’t need to pledge any assets. Lenders will typically ask for an online payment processor and deposit account.
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Small businesses have other financing options
Many entrepreneurs are turning to alternative finance models for small businesses as the most preferred option. They provide flexible financing options that can help you get the money you require to expand your business.
Alternative loans are also less expensive than traditional ones. Banks typically require huge down payments, and you might require a few days before they are able to provide the funds you require.
Lines of credit, cash advances for merchants as well as invoice discounting card and credit cards are all options for business loans. These options can help you quickly get funds.
Business lines of credit work in the same way as credit cards, but charge only interest on the amount that you withdraw. These options can be particularly beneficial for expenses that are short-term.
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Working capital loans can be beneficial for everyday expenses for example, paying employees or purchasing inventory. However, they’re not an best suited for major business transformations.
Be sure to choose a lender who has experience in business loans for alternative businesses. Your credit score is crucial. Your chances of getting a favorable finance deal are greater if you have a higher credit score.
Other alternative financing models for small businesses are peer-to peer lending. Similar to crowdfunding, peer-to business lenders offer small businesses loans from multiple investors. This option is especially useful for small-sized businesses that do not have access to collateral.