How the Small Business Administration Can Help Finance Your Business
Starting or expanding a business comes with a range of responsibilities from strategy to hiring to most importantly, funding. Learning about financing options and choosing a lender can be intimidating, but the Small Business Administration (SBA) is a good place to start. The agency provides an array of financing for small businesses from the smallest needs in micro-lending to substantial debt and equity investment capital (venture capital). Loans are made through banks, credit unions, and other lenders who partner with the SBA.
The SBA provides assistances primarily through these programmatic functions:
Starting and Expanding Businesses
- Basic 7(a) Loan Program: Gives 7(a) loans to eligible borrowers for starting, acquiring and expanding a small business. This type of loan is the most basic and the most used within SBA’s business loan programs. Borrowers must apply through a participating lender institution.
- Certified Development Company (CDC) 504 Loan Program: Provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.
- Microloan Program: Offers very small loans to start-up, newly established, or growing small businesses. SBA makes funds available to nonprofit community-based lenders which, in turn, make loans to eligible borrowers in amounts up to a maximum of $50,000. Applications are submitted to the local intermediary and all credit decisions are made on the local level.
Disaster Loans
- Disaster Assistance Loans: Provide financial assistance to victims of disasters or to individuals in a declared disaster area. You may be eligible for this type of loan even if you don’t own a business.
- Economic Injury Loans: Assist small businesses, small agricultural cooperatives, and nonprofit organizations as they recover from economic losses resulting from physical disaster or an agricultural production disaster.
Export Assistance Loans
- Export Express: Provide exporters and lenders with a streamlined method of obtaining financing for loans and lines of credit up to $500,000. Lenders use their own credit decision process and loan documentation; exporters get access to their funds faster. SBA provides an expedited eligibility review with a response in less than 24 hours.
- Export Working Capital: Offers loans targeted at businesses that are able to generate export sales but need additional working capital to support these opportunities.
- International Trade Loans: Gives term loans that are designed for businesses that plan to start/continue exporting or those that have been adversely affected by competition from imports. The proceeds of the loan must enable the borrower to be in a better position to compete.
Veteran and Military Community Loans
- Military Reservist Economic Injury Disaster Loan: Offers funds to eligible small businesses to meet ordinary and necessary operating expenses that could have been met, but are unable to meet, because an essential employee was “called-up” to active duty in their role as a military reservist.
Special Purpose Loans
- CAPLines: Help small businesses meet their short-term and cyclical working-capital needs through the SBA umbrella program called CAPLines.
- Pollution Control Loans: Provides financing to eligible small businesses for the planning, design, or installation of a pollution control facility.
- S. Community Adjustment And Investment Program (CAIP): CAIP is a program established to assist U.S. companies that are doing business in areas of the country that have been negatively affected by the North American Free Trade Agreement (NAFTA). To be eligible, a business must reside in a county noted as being negatively affected by NAFTA, based on job losses and the unemployment rate of the county.
Grants
The SBA does not provide grants for starting and expanding a business, but they do provide grants for small businesses that are engaged in scientific R&D. You can qualify for federal grants under the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. SBIR and STTR programs encourage small businesses to undertake R&D projects that meet federal R&D objectives and a have high potential for commercialization. More information on SBA research grants can be found at SBIR.gov.
To make the process easier for borrowers, the agency has an online referral tool called LINC. The tool connects small business owners with participating SBA lenders in their communities by enabling prospective borrowers to complete a short online questionnaire. The responses are forwarded to participating SBA lenders that operate within the small business’ county, and if lenders are interested, then contact information will be exchanged.
To learn more about the SBA and its lending programs, visit www.sba.gov.
Source: Small Business Administration – https://www.sba.gov