If you’re a small business owner looking for a working capital loan to get your business off the ground there are many options that you may consider. These include SBA 7(a) or term loans, and unsecured work capital loans. You could also look into alternative financing options that can be used to help 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 require working capital. These loans are flexible and are able to be used for many purposes. The funds can be used to refinance debt, expand your business or to purchase assets.
The SBA guarantees the loan in part which means lenders are less likely to default. However, a fee is paid to guarantee the loan. The fee is usually 3.75% of the guaranteed amount of the loan.
The SBA website provides a comprehensive explanation of the SBA 7 (a) loan. They’ll also have access to the SBA Lender Match tool, which connects applicants to SBA-approved lenders within two days.
Like most loans, the interest rates on 7(a) loans will differ dependent on the amount and repayment terms. It can be variable or fixed, and it can be pegged to the prime rate.
To be eligible for an SBA 7(a) loan you must submit an application and have it approved. The lender will then look over your financial history and evaluate your business plan. Once you have been approved, you sign a loan agreement to receive the loan funds.
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Unsecured working capital loans
If you’re just starting out or expanding, an unsecured working capital loan is an investment that is financially sound. It can be used to pay for equipment, expansion or to improve your building, among other things. The right type of loan will make your business thrive.
It’s much easier than you might think to obtain a working capital loan. It is possible to get a loan using just one page unlike the line credit. You can even fund your loan using three months of bank statements from your business.
Unsecured loans carry higher interest rates. This is due to the fact that the lender is taking on more risk. In this regard an owner of a business must have a great credit score to be eligible. In addition, you should have a plan for repaying the loan on time.
Unsecured working capital loans are a great option to fill a financial gap in your company. By taking a working capital loan allows you to take advantage of lower prices on essential products and improvements to your facilities. A working capital loan will allow you to keep your business running during tough economic times.
Another benefit of an unsecure working capital loan is that you do not need to pledge any of your assets. Typically, lenders will ask for an online payment processor and an account for deposits.
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Alternative finance models for small companies
Alternative finance models for small businesses are fast becoming the preferred option for many entrepreneurs. They provide flexible financing solutions that can help you get the money you require to expand.
Alternative loans are also more affordable than traditional loans. Banks typically require large down-payments and you may have to wait a few months before you can secure the money you need.
Some other alternatives for business loans include lines of credit invoice discounting, credit cards, and merchant cash advances. All of these options give you the opportunity to obtain money quickly and conveniently.
Business credit lines are similar to credit cards, but they charge interest only on the money you withdraw. These types of credit are particularly beneficial for short-term expenditures.
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Working capital loans are useful to cover the cost of daily expenses, such as purchasing inventory or paying employees. However, they’re not an best suited for large-scale business transformations.
When choosing a lender for an alternative business loan, make sure you select a company with prior experience. Your credit score is crucial. The better your score, the higher your chances of securing favorable financing deals.
Other alternative financing options for small businesses involve peer-to-peer lending. Similar to crowdfunding and peer-to-business, peer-to-business lenders offer small businesses loans from several investors. This option is particularly beneficial for small companies that don’t have collateral.