The United States Small Business Administration provides several kinds of business assistance. While it does not provide loans directly to businesses, it does make it possible for private and public lenders to make loans by providing loan guarantees and loan funds.
Congress has decided, at various times, to boost the number small businesses and the volume of small business transactions. The Small Business Administration is the primary federal agency for these efforts. They serve as a source of grants to public bodies, contracts to businesses, and a loan guarantor for banks and lenders. They sponsor a variety of programs, including special programs for startups, expansions, international businesses, and businesses owned by women, veterans, and other disadvantaged groups.
Small Business Association Loans
An SBA Small Business Loan is an indirect loan to a business. The goal of the SBA is to help small businesses compete in the mainstream economy. This includes building capacity to get loans and financing from banks and commercial lenders. The SBA operates several grant, contract, and loan assistance programs. The primary loan programs are:
- Section 7(a) loan program
- Microloans
- Export Assistance loans
- CDC/504 Loan Program
- Disaster Assitance Programs
The purpose of the loans and guarantees is to enhance the credit and capacity of U.S. small businesses to increase competition, to hire and train employees, and to sell goods and services domestically or around the world. The primary loan assistance program is the Section 7(a) program; this is the standard government small business loan. SBA provides repayment guarantees to banks and lenders of up to 85% of the loan amount to a maximum of $5 million. By reducing a private lender’s exposure to default, SBA loan guarantees encourage private banks or lenders to make loans to qualified small businesses.
Microloans
Community-based institutions administer microloans and the CDC/504 Loan Program. Microloan lenders receive funds from the SBA and lend businesses up to $50,000. Specially designed for community-based services and businesses, the loans provide employment opportunities and necessary services such as childcare facilities. Microloans usually require exhaustion of commercial lending sources prior to consideration. The CDC/504 Loan Program is a resource for the acquisition of capital, such as machinery or equipment, and assets, such as land or buildings. CDC/504 agencies receive funds from the SBA and administer loan programs in connection with traditional, private lending sources.
Small Business Grants
The SBA offers some small business grants in addition to loans. Grants are sums of money that you don't have to pay back but are given with certain stipulations. Free money is always good, but it's also hard to get. Small business grants from the SBA are funded with taxpayer dollars, so they're especially difficult to qualify for. Typically, SBA grants are limited to non-profit organizations and educational programs. If you don't fit this description, check with your local or state government to see what loans or grants are available. Local governments may offer support for businesses that will create a large number of jobs or bolster tourism, even if those businesses aren't non-profit.
