If you are a small-scale business owner looking for a working capital loan in order to get your business off the ground, there are many options you could take into consideration. Some of these options include SBA 7(a) term loans as well as non-secured working capital loans. You may also consider looking into alternative financing options that could be used to finance your small business.
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SBA 7(a), term loans
If you are a small business owner and you are 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. You can use the money to refinance debt, grow your company, or purchasing assets.
The SBA guarantees some of the loan which means lenders are less likely to default. The guarantee comes with a fee. This is usually 3.75% of the guaranteed amount of the loan.
The SBA website offers a comprehensive explanation of the SBA 7 (a) loan. They will also be able access the SBA Lender Match Tool, which connects applicants with approved lenders within two days.
As with most loans, the interest rate on a 7(a) loan will depend on the amount and repayment terms. It could be fixed, variable, or linked to the Prime Rate.
To apply for an SBA 7(a) loan you must submit an application and have it approved. A lender will then review your financial standing and analyze your business plan. Once you have been approved, you sign a loan agreement to receive the loan funds.
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Unsecured working capital loans
A working capital loan that is unsecured is a wise financial choice regardless of whether or not you are expanding or just starting out. It can be used to fund equipment, expansion or to improve your building among other things. The right choice can help your business grow.
A working capital loan could be much simpler than you think. Unlike a line of credit you can obtain the loan using a single application. You can even pay for your loan using 3 months of bank statements from your business.
Unsecured loans come with higher rates of interest. This is because the lender takes on more risk. To qualify, a business owner must have excellent credit ratings. Additionally, you must have a plan to pay back the loan in a timely manner.
Unsecured working capital loans are a great way for your business to cover short-term financial gaps. With a working capital credit you can avail of low rates on key products and upgrades to your facilities. A working capital loan can allow you to stay in business in tough economic times.
A working capital loan that is unsecured offers another advantage: it doesn’t require the pledge of any of your assets. The lenders will usually ask for an electronic payment processor as well as a deposit account.
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Smaller businesses have other financing options
Many entrepreneurs are opting for alternative finance models for small companies as their preferred choice. These flexible financing options can provide the funds you require for growth.
Alternative loans are also less expensive than conventional ones. Banks typically require large down-payments, and you may have to wait a few months before you can secure the money you need.
Alternative business loan options include lines of credit, invoice discounting, credit cards, and cash advances for merchants. These options can help you quickly get funding.
Business credit lines are similar to credit cards, except they charge interest only on money you withdraw. These types of credit can be especially beneficial for expenses that are short-term.
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Working capital loans are useful for everyday expenses such as purchasing inventory or paying employees. However, they aren’t the an ideal solution for major business changes.
Make sure to choose a lender with experience in alternative business loans. Your credit score is crucial. The better your score, the better your chances of receiving a favorable financing deal.
Peer-to-peer lending is a different finance option for small-sized companies. Similar to crowdfunding and peer-to-business, peer-to-business lenders offer small businesses loans from a variety of investors. This option is especially useful for small businesses that do not have collateral.