If you’re an owner of a small business seeking an working capital loan to get your business going, there are many options that you may look into. One of them is SBA 7(a) term loans as well as unsecure working capital loans. You could also look into alternative financing options that can be used to finance your small-scale business.
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SBA 7(a) and term loans
SBA 7(a) or term loans are available to small business owners who require working capital. They are extremely flexible loans that can be used for a variety purposes. You can use the funds for refinancing debt, expanding your business, or buying assets.
The SBA guarantees some of the loan which means lenders are less likely to default. However, a fee is paid for the guarantee. This fee is usually 3.75% of the loan’s guarantee amount.
The SBA website offers a comprehensive explanation of the SBA 7 (a) loan. They will also have access to the SBA Lender Match tool, which connects applicants with SBA-approved lenders in just two days.
Like all loans, the rate of interest for 7(a) loans will vary according to the amount and repayment terms. It can be fixed, variable or tied to the Prime Rate.
To apply for an SBA 7(a) loan you must submit an application and be approved. A lender will then assess your financial history and assess your business plan. After the approval, you will sign a loan contract 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 purchase equipment or expand your business or even to upgrade your facility. The right type of loan will help your business grow.
It can be much easier than you imagine to get a capital loan. As opposed to a credit line you can obtain an advance with just a single application. You can even fund your loan using 3 months of bank statements for business.
Unsecured loans come with higher rates of interest. This is because the lender is taking on more risk. So an owner of a business should have a high credit score in order to be eligible. It is also essential to have a plan to repay the loan on time.
Unsecured working capital loans are a great way for your business to bridge short-term financial gaps. You can enjoy low costs on the most important products or upgrades to your facilities through working capital loans. A working capital loan will allow you to keep your company afloat during difficult economic times.
Another benefit of an unsecured working capital loan is that you don’t have to pledge any of your assets. The lenders will usually ask for a payment processor and a deposit account.
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Small businesses have other financing options
Alternative financing models for small companies are quickly becoming the preferred choice for many entrepreneurs. These flexible financing options can provide you with the funds you require for expansion.
Alternative loans are also less expensive than traditional ones. Banks usually require large down-payments and you might have to wait a while before getting the funds you require.
Some other alternatives for business loans include lines of credit, invoice discounting, credit cards and merchant cash advances. These options can help you quickly get funds.
Business lines of credit function similar to credit cards, but they charge only interest on the amount that you take out. These types of credit can be especially beneficial 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 purchasing inventory. However, they’re not the an ideal solution for major business transformations.
Be sure to select a lender with experience in business loans for alternative businesses. Also, consider your credit score. The greater your score, the higher your chances of securing an attractive financing deal.
Peer-to-peer lending is a different financing option for small businesses. Peer-to-business lenders provide small businesses loans from multiple investors, similar to crowdfunding. This is particularly useful for small businesses that do not have access to collateral.