If you’re an owner of a small-sized business seeking a working capital loan to get your business off the ground there are plenty of options you could consider. These include SBA 7(a) and term loans and unsecured work capital loans. You could also look into alternative financing options that could be used to help finance your small business.
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SBA 7(a) term loans
SBA 7(a), term loans are available to small business owners who require working capital. These are extremely flexible loans that can be used for a variety of purposes. The money can be used to repay debt, expand your business, or purchase assets.
The SBA guarantees a portion of the loan to ensure that lenders are less likely to default. However, a fee will be payable for the guarantee. The fee is typically 3.75 percent of the loan’s guarantee amount.
The SBA website provides a detailed explanation of the SBA 7 (a) loan. They’ll also have access to the SBA Lender Match tool, which matches applicants with SBA-approved lenders in just two days.
As with all loans the interest rate on a 7(a) loan will be contingent on the amount and repayment terms. It can be fixed or variable or pegged to the prime rate.
To be eligible for an SBA 7(a) loan you must submit an application and be approved. A lender will then review your financial standing and analyze your business plan. After approval, you’ll sign a loan agreement and receive the loan funds.
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Unsecured working capital loans
An unsecured working capital loan is a wise financial decision regardless of whether you are expanding or just starting out. It can be used to buy equipment or expand your business or upgrade your building. The right option will make your business grow.
Getting a working capital loan can be much simpler than you think. It is possible to get a loan by filling out a single page, unlike the line credit. You can even fund your loan by using 3 months of business bank statements.
Unsecured loans are more expensive in terms of interest rates. This is due to the fact that the lender takes on greater risk. To be eligible, a business owner must have excellent credit ratings. In addition, you should have a plan to pay back the loan on time.
Unsecured working capital loans are an excellent method for your business to bridge short-term financial gaps. By taking a working capital loan allows you to take advantage of low rates on key products and upgrades to your facilities. A working capital loan can allow you to stay in business even in difficult economic times.
An unsecure working capital loan is another benefit because it doesn’t require the pledge of any assets. The lenders will usually ask for a payment processor and a deposit account.
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Alternative financing models for small-sized businesses
Alternative finance models for small-sized businesses are fast becoming the preferred choice for many entrepreneurs. These flexible financing options can give you the cash you need for growth.
Alternative loans are also more affordable than traditional loans. Banks typically require large down-payments, and you may have wait for a while before you can obtain the money you require.
Some other alternatives for business loans include lines of credit invoice discounting, credit card, and merchant cash advances. These options can help you to quickly obtain funding.
Business lines of credit function exactly the same way as credit cards, but they charge interest only on the money that you take out. These options are especially useful for expenses that are short-term.
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Working capital loans can be useful for daily costs such as purchasing inventory or paying employees. They’re not the ideal solution for large-scale transformations of businesses.
Make sure to choose an institution with experience in business loans for alternative businesses. Also, consider your credit score. Your chances of getting a favorable financing deal are increased if you have a better credit score.
Other alternative financing options for small businesses are peer-to peer lending. Similar to crowdfunding, peer-to business lenders offer small businesses loans from multiple investors. This option is particularly useful for small companies that do not have collateral.