If you are a small business owner seeking an working capital loan to get your business off the ground there are many alternatives you can think about. Some of these options include SBA 7(a) term loans and working capital loans that are not secured. Alternative financing models could be available to finance your small business.
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SBA 7(a) and term loans
SBA 7(a), term loans are available to small entrepreneurs who require working capital. These loans are flexible and can be used for many purposes. The funds can be used to refinance debt, expand your company, or purchasing assets.
The SBA guarantees the loan in part so lenders are less likely to default. The guarantee comes with a cost. The fee is typically 3.75% of the loan’s guaranteed amount.
Anyone interested can gain more information about the SBA 7(a) loan by checking out the SBA website. They can also access the SBA Lender Match Tool, which connects applicants with approved lenders within two days.
As with all loans the rate of interest on a 7(a) loan will depend on the amount and repayment terms. It could be variable, fixed or linked to the Prime Rate.
To be eligible for an SBA 7(a) loan you must fill out an application form and have it approved. The lender will go over your financial history 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
A working capital loan that is unsecured is a wise financial decision regardless of whether or not you are expanding or starting out. It can be used to buy equipment, expand your business, or upgrade your building. The right type of loan will help your business thrive.
It’s much easier than you might think to get a working capital loan. As opposed to a credit line you can apply for a loan by filling out a simple application. You can even pay for your loan using 3 months of bank statements for business.
Unsecured loans have higher interest rates. This is due to the fact that the lender assumes greater risk. As such the business owner must have a great credit score to be eligible. You should also have a plan for repaying the loan on time.
Unsecured working capital loans can be an excellent option for your business to cover short-term financial gaps. You can obtain low prices on essential products or upgrades to your facilities through working capital loans. A working capital loan can help you to keep your business running during difficult economic times.
An unsecured working capital loan has another advantage: it doesn’t require the pledge of any of your assets. Typically lenders will require an online payment processor and an account for deposit.
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Smaller businesses have other financing options
Alternative financing models for small-sized businesses are fast becoming the preferred option for many entrepreneurs. These flexible financing options can provide you with the cash you require for growth.
Alternative loans are also more affordable than traditional ones. Banks usually require large down-payments and you might have to wait a while before you can get the money you need.
Lines of credit, merchant cash advances as well as invoice discounting card and credit cards are all options for business loans. These options all offer you the chance to get funds quickly and easily.
Business credit lines are similar to credit cards in that they charge interest only on money you take out. These are particularly useful for expenses that are short-term.
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Working capital loans are helpful for day-to-day expenses, such as paying employees or ordering inventory. However, they’re not an best suited for large-scale business transformations.
Be sure to select an institution with experience in alternative business loans. Also, take into consideration your credit score. The higher your score, the better your chances of receiving favorable financing deals.
Other alternative models for financing small businesses are peer-to peer lending. Similar to crowdfunding, these peer-to-business lenders provide small businesses with loans from multiple investors. This is particularly useful for small businesses that don’t have access to collateral.