Funding a business

Government Small Business Loans

Government small business loans help put your own business within reach. First there’s the quest for a decent location, then comes building a customer base, followed by all the initial hiccups of generating a cash flow before your business grows roots and gains momentum. The beginning of a business is crucial because it’s when you gain or lose market credibility. If you disappoint your customers, they may not give you a second chance. If your business gets off to a rocky start (most do), and you believe you can recover but need further financing to make this happen, you can apply for government small business loans.

Why Government Loans?

For-profit lenders are reluctant to issue loans to anyone who does not have a strong credit report and financial history. That is not the case with government small business loans. Obviously, a decent credit report is important, and you will have to follow the guidelines regarding the repayment period and the interest rate set by the government, but usually the interest rates charged by government loans are lower than those you could expect in the private sector.

More about Government Small Business Loans

Government loans are typically offered through banks and credit unions that partner with the Small Business Administration (SBA). The SBA is a U.S. government body, with the motive of providing support for small businesses and entrepreneurs. For each loan authorized, a government-backed guarantee offers serious credibility, since the lender knows that even if you default, the government will pay off the balance. These loans can be applied to a number of uses, such as:

Purchase of new equipment, machinery, parts, supplies, etc.
Financing leasehold improvements
Commercial mortgage on buildings
Refinance existing debt
Establishing a line of credit

Government small business loans benefit both small businesses and the lending agency. For small businesses, it is beneficial because this is money & capital they may not have access too. For banks, the loan’s risk is decreased due to the loan being backed by the SBA.

Different SBA Government Loans

The SBA extends financial help through various lending programs it has to offer. Some of the more popular loans are:

7(a) Loan Guarantee Program: aimed primarily in helping a small business start or expand its services. The maximum size of such a loan is $5 million. MicroLoan Program:mostly used for short-term purposes, such as purchase of goods, office furniture, transportation, computers, etc. The maximum amount is fixed at $50,000.
504 Fixed Asset Program:featuring fixed-rate and long-term financing, these loans are aimed at applicants whose business model will benefit their community directly, either by providing jobs or bringing needed services to an underserved area. Again, the maximum amount is $5 million.
Disaster Assistance:under this program, loans are sanctioned to renters or homeowners with a low-interest, long-term plan for the restoration of property to its pre-disaster condition.

In most cases, maintaining a good business credit report is enough to qualify. In addition, it instills confidence not only in the lender, but also in you. There is at least one SBA office in every state in America. If you contact them regarding the startup status of your business model and plan, you can get started on a government small business loan that will give you the financing to make your dreams a reality.

Small Business Loans

Of the total people who leave their jobs, almost 38 percent cite not being able to work the way they would like to, or the constant nagging of their boss as the primary reason. Another reason people quit their job is because they are considering being their own boss by starting a small business. But it is not an easy task. You need an actual business plan and approach, the proper license(s), and most importantly, the necessary financial resources (typically small business loans) to insure your businesses starts off on proper footing.

As defined by the Small Business Administration (SBA), a small business is any business venture which has less than 500 employees and less than $7 million in annual receipts. In the United States, there are various types of small business loans to satisfy the business plan being presented to the lender.

The Different SBA Loan Programs

7(a) Loan Programs

Businesses with special requirements (such as those in exports or those operational in rural areas) are covered under this program. This is considered to be the most flexible choice, and also the most suitable one if you have a start-up in mind. The different 7(a) loan programs are:

Special Purpose Loans:offers 7(a) loans to those businesses which have been affected by NAFTA, to assist Employee Stock Ownership plans and so on. Export Loan Programs: fewer than 70 percent of the total export businesses in the U.S. have a maximum employee count of 20. The various export loan programs further expand their export activities. Rural Business Loans: this program is aimed at providing a simpler and more streamlined 7(a) process to acquire loans for businesses operating in the rural areas.

Microloan Program

If you are in need of small, short-term loans, then the Microloan program is just the right deal for you. You can use Microloan funds for:

Purchasing supplies or inventory
Purchasing machinery
Purchase of furniture

The Microloan fund cannot be used for the purchase of real estate or for the paying off of any existing debts. The maximum Microloan amount is $50,000.

CDC/504 Loan Program

Spanning long-term financial planning, the CDC/504 Programs provide a platform for the development of the community as a whole. The loan sanctioned under this program provides small businesses with fixed-rate financing. These finances are then utilized to acquire assets which are mainly aimed at modernization, such as commercial mortgages, street-improvement utilities, and so on. Your small business should be operated with a profit-seeking intention, but should not be engaged in the investment of real estate.

Loans for Women-Owned Business

Being a women entrepreneur, the world can be yours for the taking if you plan the expansion of your business correctly. It is advised that you visit the SBA Office for Women’s Business Ownership for further information related to the different types of grants and loans available to women and counseling on the same. The National Women’s Business Council is another federal advisory body which addresses various economic issues and offers advice to female business owners.

Wide Coverage

Small businesses still account for over 80 percent of new job opportunities. The path to own and run a small business is open to everyone. In fact, minority groups and those affected by a disaster can avail the various small business loans which are specifically designed for them. So do not be afraid to stand out of the crowd; you do not need an MBA to make this happen. It can be more rewarding that you ever imagined.

More Related Articles:
Small Business Credit Cards: http://www.sba.com/funding-a-business/business-credit-cards/
Small Business Loans for Women: http://www.sba.com/funding-a-business/small-business-loans-for-women/
Unsecured Business Loans: http://www.sba.com/funding-a-business/unsecured-business-loans/