The SBA’s Viewpoint

The Small Business Administration began offering loans in the 1950s. Their goal has always been to develop new jobs within the United States. Assisting a new small business is the best way for job growth to excel. While many people dream of owning their own business, the truth is that finding financing for rent, equipment, advertising, employees, and other business necessities is near to impossible. This is where the SBA steps in. They want to take a good business idea and help get it off the ground.

U.S. Government Small Business Loans Goals

U.S. Government small business loans come in a wide variety of programs. Many of them last from ten to twenty-five years. A ten-year loan is typically given when a business owner needs working capital, money to get the business off the ground while paying salaries, insurance, and other necessities. A twenty-five year loan is used for fixed assets that include machine purchases, building expenses, and any other item that can be sold. Interest rates are kept low so that the new business stands a chance at succeeding.

Available Programs

SBA offers four main loan programs: 7(a), CDC 504, Microloans, and Special Recovery. Each loan covers different needs.
The 7(a) Program:
7(a) is a program sponsored by the SBA, but the actual lender is any one of your area banks that work alongside the SBA in providing loans to new businesses. 7(a) requires that the borrower have a good credit history. Beyond that guideline, the company size must meet SBA requirements, sufficient proof into meeting payment obligations must be met, and the company's main structure must already be set in place. Size standards are very specific to the business you plan to start. For example, a soybean farm or vineyard must be valued at less than $725,000 to be eligible. Non-profit companies are ineligible.
The CDC 504 Program:
Any U.S. government small business loans associated with the CDC 504 program involve developing or strengthening the businesses within a small community. Typically, this means the loan can be used to buy or improve area property. The loans range from ten to fifteen years and require collateral. To use a CDC 504 loan, the business must have a net worth of less than 7.5 million, and the first two years' income cannot exceed $2.5 million. Investors looking to create rental properties will find the CDC 504 program excludes them.

Explaining Microloans

If your business is very small and is non-profit or associated with a Native American tribe, a microloan will suit your needs. Typically, this type of U.S. Government small business loan is valued at $10,000 to $30,000. The applicant needs to be able to prove they have had at least one year of experience in a similar cause, and collateral is required in many cases.

Disaster Recovery Loans Made Simple

Many are aware of the federal government's Disaster Recovery program. If a natural disaster destroys or damages your current small business, you can apply for a Disaster Recovery loan. You will be asked to provide lists of your inventory at the time of the disaster, financial statements, past years' tax statements, and information regarding your credit history.