Loans, Grants and Other Funding Programs

The U.S. Small Business Administration (SBA) has provided capital, contracts, and counseling to small business owners since 1953. The agency's website presents in-depth guidance on business planning, start-up, management and exit strategies, SBA services, useful tools, and local resources. With the links provided here, this wealth of information is just a few keystrokes away.


Loans, Grants and Other Funding Programs

When you are ready to consider financing products for your small business, the SBA will guide you through the best options available for your company and location. Subjects include financing through SBA loan programs, government grants, bond options, and venture capital or other financing options.


7(a) Loan Program

The 7(a) Loan Program — SBA’s most common model — provides financial help for businesses with special requirements. The specific terms of all loans are negotiated between a borrower and an SBA-approved lender.

An applicant’s eligibility is based on the nature of the company and its principals, how it earns income, the owners’ character and company location. While SBA does not determine eligibility per se, it does require certain universal criteria. A business must:

  • Meet the SBA definition of small business
  • Demonstrate a need
  • Be for-profit
  • Engage in — or plan to conduct — business in the U.S. or its possessions
  • Demonstrate reasonable invested equity
  • Utilize other financial resources, including personal property, before applying for financial support assistance
  • Use loan revenues for sound business reasons
  • Be in good standing regarding all debt obligations to the U.S. government

There is a long list of ineligible businesses, as well. These include most financial companies, insurance firms, government-owned entities, foreign-owned businesses and many more.


Special 7(a) Loans

The 7(a) Loan Program delivers financial help to businesses with special requirements, such as those impacted by NAFTA. They likewise offer financial assistance to Employee Stock Ownership Plans, as well as loans to implement pollution controls.

Other 7 (a) Loan models include:

  • CAPLines, structured to help small companies meet their short-term and cyclical working capital requirements.
  • SBA Export Loan Programs assist small business exporters with several loan programs engineered to help develop or expand export activities. These include the Export Express Loan Program, Export Working Capital Program, and International Trade Loan Program.
  • Advantage Loans are SBA guaranteed programs. These 7(a) business loans include the Small/Rural Lender Advantage Loan, the Community Advantage Loan and the Small Loan Advantage.
  • The Small/Rural Lender Advantage initiative addresses and accommodates the unique loan management needs of small community/rural-based lenders.
  • Community Advantage is an SBA pilot loan program addressing the credit, management and technical assistance needs of small businesses in underserved markets.


Microloan Program

SBA's Microloan Program provides small, short-term loans to small businesses to help with working capital and the purchase of inventory, supplies, furniture, fixtures, machinery or equipment. SBA provides funds to intermediary lenders, specifically designated community-based organizations providing business training and technical assistance to applicants. Certain microloans are also available to qualified not-for-profit child-care centers. Loans can go up to $50,000, but the average microloan is about $13,000.


CDC/504 Loan Program

The CDC/504 Loan Program offers small businesses another avenue for business financing, at the same time promoting business development and job creation. The 504 Loan Program provides approved small applicants with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization.

504 loans are made available through Certified Development Companies (CDCs), SBA's community based partners for providing 504 Loans. Loan proceeds can be used for the purchase of fixed assets such as land and buildings, improvements, and for long-term machinery and equipment. Qualifying businesses must have less than $2.5 million in net income, and other restrictions also apply.

A Certified Development Company (CDC) is a nonprofit corporation set up to contribute to the economic development of its community. CDCs are located nationwide and operate primarily in their state of incorporation (Area of Operation). CDCs work with SBA and private-sector lenders to provide financing to small businesses through the CDC/504 Loan Program, which provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.

Typically, a 504 project includes:

  • A loan secured from a private sector lender with a senior lien covering up to 50 percent of the project cost;
  • A loan secured from a CDC (backed by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost;
  • A contribution from the borrower of at least 10 percent equity.


Disaster Loans

SBA provides low-interest disaster loans to businesses of all sizes, private non-profit organizations, homeowner, and renters. These long-term loans may be for physical or economic damage, home or personal property, or business property. In addition to Fact Sheets for each category of disaster assistance, which delineate loan limits and application procedures, the website also lists current disaster declarations by state.

All SBA loan programs require specific application procedures. These programs offer either online application functions, downloadable forms, or both. Questions typically address credit, financial needs, and corporate information. The SBA likewise provides checklists to help you gather the required documentation.


Grants

The federal government provides grants only to non-commercial organizations, such as non-profits and educational institutions in areas such as medicine, education, scientific research and technology development. The federal government also provides grants to state and local governments to assist them with economic development.

To identify what government financing programs may be available for your business, take a look at the Access Financing Wizard from BusinessUSA.


Surety Bond

SBA offers surety bond guarantees for businesses that meet certain eligibility requirements. All federal construction contracts valued at $150,000 or more require a surety bond during the bid process or as a condition of contract award. Most state and municipal governments as well as private entities have similar mandates, as do service contracts and some supply contracts. Bond applications and other filing documents are available online.


SBA Learning Center

Since its inception, the SBA Learning Center has provided counseling and training programs for small businesses. In today's global economy, continued education, counseling, and training are not only important for your business' continued economic success, but also necessary to ensure ongoing employee satisfaction.

The Learning Center’s free courses number in the dozens. Ranging from basic accounting and writing business plans to minority businesses and franchising, information is easy to access, clear and individually paced. Tools include podcasts, videos, spread-sheets and calculators to assist small business owners and prospective entrepreneurs. Courses do require registration but include most of the necessary information required to successfully start and run a small business.

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