There are a myriad of options for small-scale business owners seeking working capital loans to get their business off the ground. Some of these include SBA 7(a) term loans as well as unsecure working capital loans. You may also consider looking into alternative financing models that can be used to finance your small business.
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SBA 7(a) term loans
SBA 7(a) or term loans are available to small-scale business owners who need working capital. These loans are flexible and can be used for many reasons. The funds can be used to refinance the company’s debt, grow it, or purchase assets.
The SBA guarantees the loan in part to ensure that lenders are less likely to default. The guarantee comes with a cost. The fee is usually 3.75 percent of the guarantee amount of the loan.
The SBA website provides a comprehensive explanation of the SBA 7 (a) loan. They will also be able to access the SBA Lender Match Tool, which connects applicants with approved lenders within two days.
As with most loans, the interest rate for a 7(a) loan will depend on the amount and the repayment terms. It could be variable, fixed, or tied to the Prime Rate.
To apply for an SBA 7(a) loan, you will need to complete an application and be approved. The lender will then look over your financial history and assess your business plan. Once you have been approved, you sign a loan contract to receive the loan funds.
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Unsecured working capital loans
Whether you are starting out or expanding, a non-secure working capital loan is an investment that is financially sound. It can be used to buy equipment, expand your business, or to upgrade your building. The right option will make your business thrive.
Getting a working capital loan could be more straightforward than you think. A loan can be obtained on a single form unlike a line credit. You can even use 3 months of bank statements from your business to fund your loan.
Unsecured loans are more expensive in terms of interest rates. This is because the lender takes on a greater risk. To be eligible, a company owner must have good credit ratings. Additionally, you must have a plan to repay the loan on time.
Unsecured working capital loans are an excellent option to fill a financial gap in your business. With a working capital loan allows you to take advantage of discounted prices on important products and upgrades to your facilities. A working capital loan will allow you to keep your business running even in difficult economic times.
An unsecured working capital loan also has a benefit: you don’t need to pledge any assets. Typically lenders will request a payment processor link and a deposit account.
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Small-scale businesses have other financing options
Alternative financing models for small businesses are fast becoming the preferred option for many entrepreneurs. These flexible financing options can give you the funds you require for growth.
Alternative loans are also less expensive than traditional loans. Banks typically require huge down payments and you could be waiting a long time before they can provide the money you require.
Lines of credit, cash advances for merchants invoice discounting, credit card and credit cards are all options for business loans. These options can help you quickly get funding.
Business lines of credit function exactly the same way as credit cards, but charge only interest on the amount that you withdraw. These options can be particularly beneficial for expenses that are short-term.
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Working capital loans are useful for day-to-day costs like paying employees or placing orders for inventory. They are not the best option for large-scale business changes.
When choosing a lender for an alternative business loan, make sure you work with a company that has years of experience. Also, take into consideration your credit score. The higher your score, the more likely you are to receive the best financing deal.
Other alternative financing models for small businesses involve peer-to-peer lending. Peer-to business lenders provide small businesses loans through multiple investors, much like crowdfunding. This option is especially beneficial for small businesses that do have access to collateral.