There are a myriad of options for small-scale business owners seeking working capital loans to get their business off the start. Some of these include SBA 7(a) term loans as well as non-secured working capital loans. You could also look at alternative financing options that could be used to finance your small business.
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SBA 7(a), term loans
SBA 7(a) and term loans are available to small business owners who require working capital. They are extremely flexible loans that can be used for a variety of uses. The funds can be used for refinancing debt, expanding your business, or even purchasing assets.
The SBA guarantees a part of the loan to reduce the likely that lenders will default. However, a fee will be paid for the guarantee. This fee is usually 3.75 percent of the guaranteed amount of the loan.
The SBA website provides a detailed explanation of the SBA 7 (a) loan. They can also access the SBA Lender Match Tool, which matches applicants to lenders with approval within two days.
Similar to most loans, interest rates for 7(a) loans can vary depending on the amount and the repayment conditions. It can be variable, fixed or linked to the Prime Rate.
To be eligible for an SBA 7(a) loan you must submit an application and have it approved. A lender will review your financial situation and review 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 or not you are expanding or starting out. It can be used to fund equipment, expansion or to upgrade your building among other things. The right one will make your business flourish.
The process of getting a working capital loan can be much easier than you think. Contrary to a line-of-credit you can obtain a loan with a one-page application. You can even fund your loan using 3 months of business bank statements.
Unsecured loans carry higher interest rates. This is because the lender is taking on more risk. To be eligible, a company owner must have good credit ratings. You must also have a plan for repaying the loan on time.
Unsecured working capital loans can be a great way for your company to bridge short-term financial gaps. You can get low prices on essential products or upgrades to your facilities through working capital loans. A working capital loan will allow you to stay in business during tough economic times.
Another great thing about an unsecured working capital loan is that you don’t have to pledge any of your assets. Most lenders will require an online payment processor and deposit account.
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Smaller businesses have other financing options
Alternative finance models for small-sized businesses are fast becoming the preferred choice for many entrepreneurs. These flexible financing options can provide the cash you need for growth.
Alternative loans can be cheaper than conventional loans. Banks typically require substantial down payments, and you may need to wait a while before they can provide the money you require.
Lines of credit, merchant cash advances, invoice discounting, credit card, and credit cards are all options for business loans. These options all offer you the possibility of obtaining funds quickly and easily.
Business lines of credit work similarly to credit cards, but charge interest only on money that you take out. These options can be particularly useful for spending on short-term expenses.
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Working capital loans can be helpful for day-to-day expenses like paying employees or placing orders for inventory. They aren’t the best solution for large-scale business transformations.
When choosing a lender for an alternative business loan, ensure you select a company with prior experience. Your credit score is also crucial. The greater your score, the more likely you are to receive an attractive financing deal.
Other alternative models for financing small businesses involve peer-to-peer lending. Peer-to-business lenders offer loans to small businesses from several investors, similar to crowdfunding. This option is especially beneficial for small businesses that do not have access to collateral.