If you are an owner of a small-sized business seeking a working capital loan in order to start your business there are plenty of alternatives you can look into. Some of these include SBA 7(a) term loans and non-secured working capital loans. You may also want to look into alternative financing options that can be used to help finance your small-scale business.
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SBA 7(a) and term loans
If you are a small-scale 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 many purposes. You can use the funds to refinance debt, grow your business, or for purchasing assets.
The SBA guarantees a portion of the loan to reduce the likely that lenders fail. However, a fee is payable to guarantee the loan. This fee is usually 3.75% of the loan’s guarantee amount.
The SBA website provides a comprehensive explanation of the SBA 7 (a) loan. They will also be able access the SBA Lender Match Tool, which matches applicants with lenders that have been approved within two days.
Similar to most loans, interest rates on 7(a) loans will differ dependent on the amount and repayment conditions. It could be variable, fixed or tied to the Prime Rate.
To apply for an SBA 7(a) loan you must complete an application and be approved. A lender will then assess your financial situation and review your business plan. After the approval, you sign a loan agreement and receive the loan funds.
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Unsecured working capital loans
When you’re starting out or expanding, an unsecure working capital loan can be a wise financial decision. It can be used to fund equipment, expansion, or to improve your building among other things. The right option will make your business flourish.
It’s a lot easier than you think to get a working capital loan. The loan can be secured on a single form unlike a line credit. You can even use three months of bank statements from your business to pay for your loan.
Unsecured loans come with higher interest rates. This is due to the fact that the lender is taking on more risk. In this regard the business owner must have a good credit score to be eligible. You must also have a plan for repaying the loan on time.
Unsecured working capital loans are a fantastic option to fill a financial gap in your business. You can obtain low prices on the most important products or upgrades to your facilities using working capital loans. Getting a working capital loan will allow you to remain in business during tough economic times.
Another benefit of an unsecured working capital loan is the fact that you do not have to pledge any of your assets. Most lenders will require an electronic payment processor as well as a deposit account.
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Smaller businesses have other financing options
Many entrepreneurs are turning to alternative financing models for small businesses as their preferred option. These flexible financing options can give you the cash you need to fund expansion.
Alternative loans are also less expensive than traditional ones. Banks usually require large down-payments, and you may have wait for a while before getting the funds you require.
Alternative business loan options include lines of credit, invoice discounting, credit cards, and merchant cash advances. All of these options offer you the chance to get money quickly and conveniently.
Business lines of credit function similarly to credit cards, but charge interest only on money that you withdraw. These options are particularly useful for short-term expenses.
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Working capital loans are helpful for day-to-day expenses like paying employees or purchasing inventory. They aren’t the best solution for large-scale business transformations.
Make sure to choose a lender who has expertise in alternative business loans. Also, take into consideration your credit score. Your chances of getting a favorable financing deal are higher if you have a better credit score.
Peer-to-peer lending is another alternative method of financing for small companies. Similar to crowdfunding, peer-to-business lenders provide small businesses with loans from multiple investors. This option is particularly useful for small businesses that do not have collateral.