SBA Loans

Bank Loans - Asking the bank for a small business loan is an option. Because of the economic downturn, entrepreneurs are finding it harder and harder to get a start-up loan. Be prepared with an amazing business plan and some collateral when asking for a small business loan.

 

Definition:
SBA loans are made through banks, credit unions, and other lenders who partner with the SBA (The U.S. Small Business Administration). The SBA provides a government-backed guarantee on part of the loans invested into small companies. There are 3 different types of SBA loans:

 
1)    7(a) Guaranteed Loan Program is the SBA’s primary business loan program. It's generally used for business start ups and to meet various short and long term needs, such as equipment purchase, working capital, inventory, or real estate purchase. These loans are generally guaranteed up to $750,000. The guaranty rate is 80 percent on loans of $100,000 or less and 75 percent on loans more than $100,000.
 
2)    504 Local Development Company Program provides long-term, fixed-rate financing to small businesses to acquire real estate, machinery, or equipment. The loans are administered by Certified Development Companies (CDCs) through commercial lending organizations. These loans typically financed 50 percent by the bank, 40 percent by the CDC, and 10 percent by the business. In exchange, the SBA expects the company to create/retain jobs for that industry.
 
3)    The Microloan Program offers a large amount of money, usually around $25,000, for working capital or for the purchase of inventory, supplies, furniture, fixtures, machinery, and/or equipment by businesses. Businesses utilize this loan because the amount of equipment they need is small compared to other loan options.
 
 
SBA: Programs for Women (WBC)
 
Definition:
By law, the SBA must give out a certain number of loans per year to women entrepreneurs who are starting their own companies. The Office of Women’s Business Ownership's mission is to establish and oversee a network of Women’s Business Centers (WBCs) throughout the United States and its territories.  Through the management and technical assistance provided by the WBCs, entrepreneurs, especially women who are economically or socially disadvantaged, are offered comprehensive training and counseling on a vast array of topics in many languages to help them start and grow their own businesses.

 

 
SBA: Small Business Investment Company (SBIC) Program
 
Definition:
The Small Business Investment Company (SBIC) is a privately owned investment company that is licensed by the Small Business Administration (SBA). SBICs supply small businesses with financing in both the equity and debt arenas. They provide a viable alternative to venture capital firms for many small enterprises seeking startup capital. Many companies choose to go through SBICs because they could not get a SBA loan. SBICs are similar, but lack the same amount of default guarantee as the SBA. The mission of the Small Business Investment Company (SBIC) program is to improve and stimulate the national economy and small businesses by stimulating and supplementing the flow of private equity capital and long term loan funds for the sound financing, growth, expansion and modernization of small business operations while insuring the maximum participation of private financing sources.
 
 
Small Business Innovation Research (SBIR) Grants
 
Definition:
The Small Business Innovation Research (SBIR) program is a highly competitive program that encourages domestic small businesses to engage in Federal Research/Research and Development (R/R&D) that has the potential for commercialization. Through a competitive awards-based program, SBIR enables small businesses to explore their technological potential and provides the incentive to profit from its commercialization. By including qualified small businesses in the nation's R&D arena, high-tech innovation is stimulated and the United States gains entrepreneurial spirit as it meets its specific research and development needs
 
Pro:
The superior aspect to funding your startup through SBAs is the government-backed guarantee if your company cannot make the payments of the loan. Although these loans are hard to obtain, they provide economic stability for small start up businesses.
 
Con:
The guidelines for SBA guaranteed loans are similar to those for standard bank loans. This means that they will, in turn, want ownership if investing in your business. Each of these government assisted loans are hard to come by, although better than any traditional bank loan.
 
Resources:
 
 

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