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The United States Small Business Administration is the government agency designed to help entrepreneurs in America fulfill their dreams of owning a small business. This agency includes myriad tools for every phase of business from a start-up guide for brainstorming business ideas to government small business loans to legal advice for complex business dealings.
Perhaps the most important feature of the SBA is the Loan guarantee programs that help small businesses obtain financing by lowering the risk to the lender. In these loans, the SBA “sets the guidelines for the loans while SBA’s partners (Lenders, Community Development Organizations, and Microlending Institutions) make the loans to small businesses. SBA backs those loans with a guarantee that will eliminate some of the risk to the lending partners.”
The SBA offers three loan programs to suit a business’ needs:
- Basic 7(a) Loan Guarantee—The most common loan program, the Basic 7(a) Loan is designed to provide financing for businesses which otherwise might not be eligible through other lending programs. It’s the most flexible loan and can be used for a variety of business purposes. Start-up and existing small businesses can benefit from this loan and can access them through commercial lending institutions.
- Certified Development Company (CDC), a 504 Loan Program—This program provides long-term, fixed-rate financing to small businesses for the purposes of buying land or equipment. Generally, this loan is used by small businesses requiring “brick and mortar” financing and can be obtained through certified development companies (private, non-profit corporations established to help develop their community or regional economy).
- Microloan, a 7(m) Loan Program—The Microloan is designed for short-term loans of up to $35,000 to small businesses and non-profit childcare centers for working capital and/or the purchase of inventory, fixtures furniture, machinery and other supplies. According to the SBA, Microloans “cannot be used to pay existing debts or purchase real estate. The SBA makes or guarantees a loan to an intermediary, who in turn, makes the Microloan to the applicant. The Microloan program is available in selected locations in most states.” Microloans are provided through designated intermediary non-profit lenders with experience in lending and technical assistance for start or expanding a business.
The SBA also offers special assistance and information for Women-, Veteran- and Native American-owned small businesses to help in establishing and maturing their businesses. There are specialty loans and grants available to minority groups and the SBA can help direct to those resources.