If you’re a small business owner seeking an working capital loan to help your business get going, there are many options to look into. Some of these options include SBA 7(a) term loans and unsecure working capital loans. Alternative financing models could 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 need working capital. These are loans that are extremely flexible that can be used for a variety uses. The funds can be used for refinancing debt, expanding your business, or even purchasing assets.
The SBA guarantees a portion of the loan so lenders are less likely to default. However, a fee will be charged 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 will also be able access the SBA Lender Match Tool, which connects applicants to lenders with approval within two days.
Like most loans, the interest rates on 7(a) loans will vary according to the amount and repayment conditions. It could be variable, fixed or tied to the Prime Rate.
To be eligible for an SBA 7(a) loan you must fill out an application and be approved. The lender will look over your financial history and assess your business plan. After the approval, you will sign a loan agreement 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 upgrade your building. The right option will help your business grow.
A working capital loan is much simpler than you think. Contrary to a line-of-credit it is possible to get a loan with a one-page application. You can even pay for your loan using three months of business bank statements.
Unsecured loans are more expensive in terms of interest rates. This is because the lender takes on a greater risk. So an owner of a business must have a good credit rating to qualify. Also, you should have a plan to repay the loan in a timely manner.
Unsecured working capital loans can be an excellent method for your business to bridge short-term financial gaps. You can get low prices on essential products or upgrades to your facilities with working capital loans. A working capital loan will help you to keep your business in business during difficult economic times.
An unsecured working capital loan is another benefit because you don’t need to pledge any assets. The lenders will usually ask for an online payment processor and deposit account.
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Smaller businesses have other financing options
Alternative finance models for small-sized companies are quickly becoming the preferred choice for many entrepreneurs. They offer flexible financing options that can provide you with the money you need to grow.
Alternative loans are also more affordable than traditional ones. Banks usually require large down-payments and you might have wait for a while before you can obtain the money you need.
Some alternative business loan options include lines of credit, invoice discounting, credit cards and merchant cash advances. These options can help you quickly get funding.
Business lines of credit function exactly the same way as credit cards, but they charge only interest on the amount that you take out. These options can be particularly useful for spending on short-term expenses.
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Working capital loans are a great option for everyday expenses such as purchasing inventory or paying employees. However, they aren’t the best suited for major business changes.
Make sure to choose a lender who has experience in business loans for alternative businesses. Your credit score is important. The more impressive your score, higher your chances of securing a favorable financing deal.
Peer-to-peer lending is another alternative financing model for small businesses. Peer-to business lenders provide loans to small businesses from multiple investors, much like crowdfunding. This is particularly beneficial for small businesses that don’t have collateral.