How can the SBA help with business financing?
Are you seeking financing for your small business? Have you turned to the Small Business Administration (SBA) for help? The SBA specializes in offering financing opportunities like grants and loans, both of which will be able to help you get your small business up and running. The SBA is part of the Federal Government and their entire goal is to help you find the money you need to get started and to also help you stay in business. Since it is quite common for small businesses to fail soon after they get started, you don't want to place your business in a place where it's not going to repay the loans it borrows.
Small Business Loan
There are multiple loan options you can qualify for when you apply to the SBA. Each loan has set guidelines that you need to meet in order to get the loan. There are 3 basic loan options that break down into the following categories:
2. Community Development Organizations
3. Microlending Institutions
When the loan is offered through the SBA, it provides the lender with a lower risk ratio as the SBA will guarantee some of the money. The loan guarantee means that the independent lenders that offer money will receive it back even if you default on the loan. However the guarantee amount must be agreed upon before the loan is issued, which means the lender might not offer the loan to you if they do not feel the guarantee amount is worthwhile.
Although you are applying for a loan through the SBA, you are actually applying for a traditional commercial loan. The difference is the guarantee through the SBA makes it a lot easier for you to acquire the loan, especially if you have less than perfect credit and the lenders aren't thrilled at the opportunity to offer you money.
Small Business Investment Program
In addition to offering loans, the SBA also offers an investment program that you need to consider in order to acquire funds to start your small business. The investment program works by having the SBA correspond with privately owned and operated investment companies and agreeing to financing options that benefit the upcoming small business and also provide the investment company with a great opportunity to earn a healthy return. The SBA will work on raising the private capital and then will sell it to you with a favorable rate. It's often financed through debt or equity investments. If you aren't a fan of the loan programs or you want to look into different financing options, the investment program is a good idea.
Small Business Bonding
After the loans and investment options, your next option is to look into the SBA's bonding program. The bonding program gives the SBA a chance to guarantee contracts up to $2 million. This leaves you with a great opportunity to acquire a bond for your business as the bonds are guaranteed. Typically you will look at surety bonds first and then consider the SBA bonding options for your business. What the bonding option also provides is an incentive to the eligible contractors, making it desirable to many.If the issuer breaches the terms of the contract, the SBA will step in and manage it, allowing you to still have the funds you need. The bonds are typically resold to new investors or the other investors have to call in their bond and forfeit the profit on it.
To learn more about the financing options that are available through the Small Business Administration, visit their website or contact them via telephone or via email.