If you’re an owner of a small-sized business seeking an investment loan to start your business, there are many alternatives you can look into. These include SBA 7(a) and term loans, and unsecured work capital loans. You might also look into alternative financing options that can be used to 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 consider applying for SBA 7(a) term loans. These loans are flexible and can be used for a variety of reasons. The funds can be used to refinance debt, expand your company, or purchase assets.
The SBA guarantees a part of the loan to reduce the likely that lenders default. However, a fee will be charged for the guarantee. This fee is usually 3.75 percent of the loan’s guarantee amount.
The SBA website provides a comprehensive explanation of the SBA 7 (a) loan. They will also be able to access the SBA Lender Match Tool, which connects applicants with lenders that have been approved within two days.
As with most loans, interest rates for 7(a) loans will differ dependent on the amount and the repayment terms. It can be fixed or variable and pegged to the Prime rate.
To be eligible for an SBA 7(a) loan you must fill out an application form and get it approved. A lender will then assess your financial situation and review your business plan. After the approval, you sign a loan contract and receive the loan funds.
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Unsecured working capital loans
An unsecured working capital loan is a smart financial decision, regardless of whether you are expanding or just starting out. It can be used to buy equipment, expand your business, or even to upgrade your facility. The right choice will allow your business to grow.
It’s much easier than you think to obtain a working capital loan. Contrary to a line-of-credit you can obtain a loan with a one-page application. You can also use 3 months of bank statements from your company to pay for your loan.
Unsecured loans are more expensive in terms of interest rates. This is because the lender takes on more risk. In this regard the business owner must have a great credit score to be eligible. In addition, you should have a plan to pay back the loan on time.
Unsecured working capital loans are an excellent option to bridge a financial gap in your business. By taking a working capital loan you can avail of discounted prices on important products and upgrades to your facilities. A working capital loan can help you to keep your business in business during tough economic times.
Another great thing about an unsecure working capital loan is the fact that you don’t have to pledge any of your assets. Typically lenders will request an online payment processor and the deposit account.
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Alternative finance models for small businesses
Many entrepreneurs are turning to alternative financing models for small enterprises as their top choice. These flexible financing options can help you get the funds you require for expansion.
Alternative loans are cheaper than traditional ones. Banks typically require large down-payments and you may have to wait a while before you can obtain the cash you require.
Alternative business loan options include lines of credit, invoice discounting, credit cards and cash advances from merchants. These options can help you quickly obtain funding.
Business credit lines are similar to credit cards, with the exception that they charge only interest on the cash you take out. These options are especially beneficial to cover short-term expenses.
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Working capital loans can be useful for daily expenses for things like paying employees or purchasing inventory. They aren’t the best solution for large-scale transformations of businesses.
Be sure to select a lender with experience in alternative business loans. Your credit score is also crucial. The greater your score, the higher your chances of securing an attractive financing deal.
Peer-to-peer lending is a different financing model for small companies. Peer-to-business lenders provide small businesses loans through multiple investors, much like crowdfunding. This is particularly useful for small businesses that don’t have collateral.