If you are a small-scale business owner looking for an working capital loan to get your business going there are plenty of options you could think about. A few of these options are SBA 7(a) term loans and unsecure working capital loans. You may also want to look at alternative financing options that could 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 are extremely flexible loans that can be used for a variety reasons. The funds can be used to refinance debt, expand your company or even purchase assets.
The SBA guarantees a part of the loan to make it less likely that lenders default. The guarantee comes with a cost. This fee is typically 3.75% of the guaranteed amount of the loan.
The SBA website provides a detailed explanation of the SBA 7 (a) loan. They also have access to the SBA Lender Match tool, which connects applicants to SBA-approved lenders within two days.
Like most loans, the rate of interest on a 7(a) loan will be contingent on the amount and repayment terms. It can be variable, fixed, or tied to the Prime Rate.
You’ll need to fill out an application to apply for an SBA 7(a) loan. A lender will review your financial standing and analyze your business plan. After the approval, you sign a loan contract and receive the loan funds.
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Unsecured working capital loans
An unsecure working capital loan is a smart financial investment regardless of whether you are expanding or just starting out. It can be used to fund equipment, expansion, or to upgrade your building among other things. The right option will help your business thrive.
It is much simpler than you think to get a working capital loan. Contrary to a line-of-credit you can obtain an advance with just a single application. You can also use 3 months of bank statements from your company to pay for your loan.
Unsecured loans have higher interest rates. This is due to the fact that the lender takes on greater risk. As such the business owner must have a great credit score in order to be eligible. Also, you should have a plan to repay the loan in a timely manner.
Unsecured working capital loans can be a great way to bridge a short-term financial gap in your company. With a working capital credit you can avail of discounted prices on important products and improvements to your facilities. A working capital loan can allow you to keep your company afloat even in tough economic times.
Another great thing about an unsecure working capital loan is that you do not need to pledge any of your assets. Typically, lenders will ask for a payment processor link and a deposit account.
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Alternative finance models for small-sized companies
Alternative financing models for small businesses are fast becoming the preferred option for many entrepreneurs. These flexible financing options can provide the funds you require for growth.
Alternative loans are also less expensive than traditional ones. Banks typically require large down payments and you may need to wait a few months before you can secure the money you need.
Lines of credit, cash advances for merchants and invoice discounting, credit card, and credit cards are all options for business loans. All of these options offer you the opportunity to obtain money quickly and conveniently.
Business lines of credit are similar to credit cards, except they charge only interest on the money you take out. These types of credit can be especially useful for short-term expenses.
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Working capital loans can be helpful for day-to-day expenses for example, paying employees or ordering inventory. However, they aren’t the an ideal solution for major business changes.
Make sure to choose a lender who has expertise in alternative business loans. Also, think about your credit score. The better your score, the higher your chances of securing a favorable financing deal.
Other alternative financing models for 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 especially beneficial for small businesses who do not have collateral.