There are a myriad of alternatives available to small-scale business owners looking for working capital loans to get their business off the beginning. A few of these options are SBA 7(a) term loans as well as unsecured working capital loans. Alternative financing models may also be available to help finance your small-sized business.
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SBA 7(a) and term loans
SBA 7(a), term loans are available to small business owners who require working capital. These loans are flexible and can be used for numerous purposes. The funds can be used to repay the company’s debt, grow it or purchase assets.
The SBA guarantees a portion of the loan to make it less likely that lenders will default. However, a fee will be paid to guarantee the loan. This 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 can also access the SBA Lender Match Tool, which matches applicants to lenders with approval within two days.
As with most loans, interest rates on 7(a) loans will vary dependent on the amount and the repayment terms. It is either variable or fixed and tied to the Prime rate.
You will need to complete an application form to be eligible for an SBA 7(a), loan. The lender will review your financial history and review your business plan. After approval, you will sign a loan contract and receive the loan funds.
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Unsecured working capital loans
An unsecured working capital loan is a wise financial choice regardless of whether or not you are expanding or just starting out. It can be used to purchase equipment or expand your business or upgrade your building. The right choice will help your business flourish.
Getting a working capital loan could be a lot easier than you think. The loan can be secured using just one page unlike the line credit. You can even fund your loan using 3 months of bank statements for business.
Unsecured loans have higher interest rates. This is because the lender is taking on more risk. Therefore the business owner must have a good credit score to be able to qualify. Additionally, you must have a plan to pay back the loan on time.
Unsecured working capital loans are a great way to bridge a short-term financial gap in your business. By taking a working capital loan, you can take advantage of lower prices on essential products and upgrades to your facilities. A working capital loan can allow you to keep your company afloat during tough economic times.
A working capital loan that is unsecured also has a benefit: it doesn’t require the pledge of any of your assets. The lenders will usually ask for the services of a payment processor and a deposit account.
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Alternative finance models for small-sized companies
Alternative financing models for small businesses are fast becoming the preferred choice for many entrepreneurs. They offer flexible financing solutions that can provide you with the money you need to expand.
Alternative loans are cheaper than traditional ones. Banks typically require large down-payments, and you may have to wait a while before you can secure the money you require.
Some other alternatives for business loans include lines of credit invoice discounting, credit cards and cash advances for merchants. All of these options give you the chance to get quick and easy funding.
Business lines of credit function similarly to credit cards but charge interest only for money that you withdraw. These types of credit can be especially useful for spending on short-term expenses.
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Working capital loans are a great option to cover the cost of daily expenses, such as purchasing inventory or paying employees. They are not the best option for large-scale business changes.
Make sure to choose a lender who has experience in business loans for alternative businesses. Your credit score is important. The better your score, the greater your chances of getting favorable financing deals.
Other alternative models for financing small businesses are peer-to peer lending. Similar to crowdfunding, peer-to business lenders provide small businesses with loans from a variety of investors. This is particularly beneficial for small businesses that don’t have collateral.