There are a myriad of options for small-scale entrepreneurs looking for working capital loans to help them get their business off the start. Some of these include SBA 7(a) term loans as well as non-secured working capital loans. You may also want to look into alternative financing options that can be used to help finance your small business.
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SBA 7(a) and term loans
SBA 7(a) and term loans are available to small entrepreneurs who require working capital. These are highly flexible loans that can be used for a variety uses. The funds can be used for refinancing debt, expanding your company, or purchasing assets.
The SBA guarantees the loan in part so lenders are less likely to default. However, a fee will be due for the guarantee. The fee is usually 3.75 percent of the guarantee amount of the loan.
The SBA website offers a thorough explanation of the SBA 7 (a) loan. They will also be able access the SBA Lender Match Tool, which matches applicants to lenders with approval within two days.
Like most loans, the interest rates for 7(a) loans will differ in accordance with the amount borrowed and repayment conditions. It could be variable, fixed, or tied to the Prime Rate.
You’ll have to fill out an application form to be eligible for an SBA 7(a) loan. The lender will review your financial history and assess your business plan. After the approval, you’ll sign a loan agreement and receive the loan funds.
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Unsecured working capital loans
An unsecure working capital loan is a wise financial decision regardless of whether or not you are expanding or just starting out. It can be used to finance equipment, expansion or to upgrade your building among other things. The right one will make your business flourish.
It’s much easier than you might imagine to get a capital loan. In contrast to a line of credit you can obtain a loan by filling out a simple application. You can even pay for your loan with 3 months of bank statements from your business.
Unsecured loans have higher interest rates. This is because the lender is taking on more risk. Therefore an owner of a business should have a high credit score in order to be eligible. You should also have a plan to repay the loan in a timely manner.
Unsecured working capital loans are a fantastic solution to bridge a financial gap in your company. By taking a working capital loan you can avail of low prices on key products and improvements to your facilities. A working capital loan can help you to keep your company afloat even in tough economic times.
Another advantage of an unsecured working capital loan is the fact that you do not have to pledge any of your assets. The lenders will usually ask for a payment processor and a deposit account.
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Smaller businesses have other financing options
Many entrepreneurs are turning to alternative finance models for small companies as their preferred choice. They offer flexible financing options that can give you the cash you need to grow.
Alternative loans are also less expensive than traditional loans. Banks usually require large down-payments, and you may have to wait a while before you can secure the funds you require.
Other alternatives to business loans include lines of credit, invoice discounting, credit card, and merchant cash advances. These options can help you quickly get funding.
Business lines of credit are similar to credit cards, except they charge interest only on money you withdraw. These are beneficial for expenses that are short-term.
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Working capital loans can be useful for everyday expenses such as ordering inventory or paying employees. However, they are not an ideal solution for major business transformations.
Be sure to select a lender with experience in alternative business loans. Your credit score is important. Your chances of getting a favorable financing deal are greater if you have a higher credit score.
Peer-to-peer lending is a different financing model for small companies. Similar to crowdfunding, peer-to business lenders offer small businesses loans from a variety of investors. This option is especially useful for small businesses that do not have access to collateral.