If you’re an owner of a small business seeking a working capital loan to get your business going there are plenty of options to consider. Some of these options include SBA 7(a) term loans as well as unsecure working capital loans. Alternative financing models may also be available to finance your small business.
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SBA 7(a) term loans
SBA 7(a), term loans are available to small business owners who need working capital. These are loans that are extremely flexible that can be utilized for a variety of purposes. The funds can be used to refinance debt, expand your business or to purchase assets.
The SBA guarantees a portion of the loan so that lenders are less likely to default. The guarantee is accompanied by a fee. The fee is typically 3.75% of the loan’s guaranteed amount.
Anyone interested can gain an understanding of the SBA 7(a) loan by looking through the SBA website. They’ll also have access to the SBA Lender Match tool, which matches applicants with lenders approved by the SBA within two days.
As with all loans, the interest rate for a 7(a) loan will be contingent on the amount and the terms of repayment. It could be fixed, variable, or tied to the Prime Rate.
To be eligible for an SBA 7(a) loan, you will need to complete an application and be approved. The lender will go over your financial information and analyze your business plan. After approval, you’ll sign a loan contract and 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 is an excellent financial choice. It can be used to purchase equipment or expand your business or upgrade your building. The right type of loan will make your business flourish.
A working capital loan can be more straightforward than you think. Unlike a line of credit you can obtain the loan using a single application. You can also use 3 months of bank statements from your company to fund your loan.
Unsecured loans are more expensive in terms of interest rates. This is because the lender takes on more risk. As such, a business owner should have a high credit score in order to be eligible. You should also have a plan to repay the loan in a timely manner.
Unsecured working capital loans can be an excellent way for your business to cover short-term financial gaps. By taking a working capital loan you can avail of low rates on key products and improvements to your facilities. A working capital loan will enable you to continue to operate in tough economic times.
Another benefit of having an unsecured working capital loan is that you do not have to pledge any of your assets. Lenders will typically ask for the services of a payment processor and a deposit account.
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Alternative finance models for small-sized companies
Many entrepreneurs are turning to alternative finance models for small-sized businesses as their preferred option. They offer flexible financing solutions that can help you get the money you need to expand.
Alternative loans can be more affordable than conventional ones. Banks typically require huge down payments, and you might be waiting a long time before they can provide the money you need.
Lines of credit, cash advances for merchants, invoice discounting, credit card and credit cards are all options for business loans. These options can help you to quickly receive funding.
Business lines of credit are similar to credit cards, except they charge interest only on the money you withdraw. These options are especially useful to cover short-term expenses.
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Working capital loans can be useful for everyday expenses like purchasing inventory or paying employees. However, they’re not the best suited for large-scale business transformations.
When selecting a lender for an alternative business loan, ensure you work with a company that has prior experience. Also, take into consideration your credit score. Your chances of getting a favorable loan deal are higher if you have a better credit score.
Peer-to-peer lending is a different finance option for small-sized companies. Similar to crowdfunding, peer-to business lenders offer small businesses loans from multiple investors. This is particularly beneficial for small businesses that don’t have access to collateral.