There are many choices available to small business owners seeking working capital loans to help them get their business off the beginning. These include SBA 7(a) or term loans and unsecured work 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) and term loans
If you are a small-scale 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 many purposes. You can use the money for refinancing debt, expanding your business, or for purchasing assets.
The SBA guarantees a portion of the loan so that lenders are less likely to default. However, a fee will be payable to guarantee the loan. This fee is typically 3.75 percent of the guarantee amount of the loan.
The SBA website offers a thorough explanation of the SBA 7 (a) loan. They also have access to the SBA Lender Match tool, which matches applicants with lenders approved by the SBA within two days.
Like all loans, the interest rates on 7(a) loans can vary dependent on the amount and repayment terms. It can be fixed, variable or linked to the Prime Rate.
To be eligible for an SBA 7(a) loan, you will need to fill out an application form and get it approved. The lender will examine your financial information and analyze 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
A working capital loan that is unsecured is a wise financial choice regardless of whether or not you are expanding or just starting out. It can be used to pay for expansion, equipment, or to upgrade your building, among other things. The right type of loan can help your business grow.
Getting a working capital loan could be more straightforward than you think. Unlike a line of credit you can apply for a loan with a one-page application. You can even pay for your loan using 3 months of bank statements from your business.
Unsecured loans have higher interest rates. This is because the lender takes on a greater risk. To qualify, a business owner must have good credit ratings. In addition, you should have a plan for repaying the loan in a timely manner.
Unsecured working capital loans can be an excellent way for your company to bridge short-term financial gaps. With a working capital loan you can take advantage of low rates on key products and upgrades to your facilities. Getting a working capital loan will enable you to stay in business during tough economic times.
Another benefit of having an unsecured working capital loan is the fact that you do not have to pledge any of your assets. Typically lenders will require a payment processor link and the deposit account.
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Smaller businesses have other financing options
Alternative finance models for small-sized businesses are fast becoming the preferred option for many entrepreneurs. These flexible financing options can help you get the cash you need for expansion.
Alternative loans are also more affordable than conventional ones. Banks will typically require large down payments and you could be waiting a long time before they are able provide the money you need.
Alternative business loan options include lines of credit, invoice discounting, credit cards and merchant cash advances. All of these options offer you the chance to get quick and easy funding.
Business lines of credit function similar to credit cards, but charge interest only on money that you withdraw. These options are particularly helpful for short-term expenditures.
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Working capital loans can be helpful for day-to-day expenses for things like paying employees or ordering inventory. However, they’re not the best suited for major business transformations.
Be sure to select a lender with experience in business loans for alternative businesses. Your credit score is important. The better your score, the more likely you are to receive favorable financing deals.
Other alternative models for financing small businesses are peer-to peer lending. Similar to crowdfunding and peer-to-business, peer-to-business lenders offer small businesses loans from several investors. This is particularly beneficial for small businesses that do have access to collateral.