There are a myriad of options available to small business owners seeking working capital loans to get their business off the start. A few of these options are SBA 7(a) term loans and working capital loans that are not secured. Alternative financing models may also be available to help finance your small business.
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SBA 7(a), term loans
If you are a small business owner and you are in need of working capital, you should consider applying for SBA 7(a) term loans. These loans are flexible and can be used for a variety of reasons. The funds can be used for refinancing debt, expanding your business, or for purchasing assets.
The SBA guarantees some of the loan so that lenders are less likely to default. The guarantee is accompanied by a fee. The fee is usually 3.75 percent of the guaranteed amount of the loan.
People interested in applying can get an understanding of the SBA 7(a) loan by visiting the SBA website. They can also access the SBA Lender Match Tool, which matches applicants to lenders with approval within two days.
Like most loans, the rates of interest on 7(a) loans will vary dependent on the amount and the repayment terms. It can be fixed, variable or tied to the Prime Rate.
You’ll need to fill out an application to apply for an SBA 7(a), loan. The lender will review your financial history and review your business plan. After the approval, you sign a loan contract and receive the loan funds.
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Unsecured working capital loans
Whether you are starting out or expanding, an unsecured working capital loan can be a wise financial decision. It can be used to buy equipment, expand your business, or even to upgrade your facility. The right option will make your business flourish.
Getting a working capital loan can be more straightforward than you think. A loan can be obtained on a single form unlike a line credit. You can even fund your loan with 3 months of business bank statements.
Unsecured loans are characterized by higher rates of interest. This is because the lender takes on more risk. As such the business owner must have a good credit rating to qualify. Additionally, you must have a plan for repaying the loan on time.
Unsecured working capital loans are a great way to bridge a short-term financial gap in your company. Using a working capital loan, you can take advantage of lower prices on essential products and improvements to your facilities. A working capital loan can allow you to keep your business running during tough economic times.
Another advantage of an unsecure working capital loan is the fact that you do not need to pledge any of your assets. Typically lenders will require a payment processor link and an account for deposit.
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Small businesses have other financing options
Many entrepreneurs are turning to alternative financing models for small businesses as their preferred option. They provide flexible financing options that can give you the money you require to expand your business.
Alternative loans are also more affordable than traditional loans. Banks usually require large deposits and you might have to wait a while before you can get the money you require.
Some other alternatives for business loans include lines of credit, invoice discounting, credit cards, and cash advances from merchants. All of these options give you the chance to get quick and easy funding.
Business lines of credit work in the same way as credit cards, but they charge interest only on the money that you take out. These are particularly useful for short-term expenses.
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Working capital loans can be useful for day-to-day costs for example, paying employees or ordering inventory. However, they’re not the suitable for major business transformations.
Be sure to choose a lender with experience in alternative business loans. Also, consider your credit score. The better your score, the better your chances of receiving favorable financing deals.
Other alternative financing models for small businesses involve peer-to-peer lending. Similar to crowdfunding, these peer-to-business lenders offer small businesses loans from several investors. This option is especially useful for small businesses that do have collateral.