In the previous two blogs, I gave you an overview of the funding options that exist for your startup business and then covered the funding options available for the early stages of your business. This week I will explain the SBA’s financial assistance programs and how they can help you raise the funds that you need. At the risk of sounding like a broken record remember: The SBA does not provide funding for your loan—it helps secure it. This week I will overview the programs available and then we will wrap up our financial series with details about the programs and how to apply for these loans.
The SBA has three basic financial programs: the Guaranteed Loan Programs, Bonding Program and Venture Capital Program. There are also additional programs available due to the government funded stimulus package.
- Guaranteed Loan Programs—Under this program, the SBA partners with lenders to help small businesses get a loan. You still work with the lending organization; however, if you cannot get approved for a loan with reasonable terms, the SBA has the ability to guarantee a portion of the loan. The lending institute must follow the guidelines set forth by the SBA. You will still need to apply for the loan; the only difference is that the loan will be structured to fit the SBA requirements and it will come with an SBA guaranty. The loan programs available include the 7(a) Loan Program (the most popular program), CDC/504 Loan Program, Microloan Program and the Disaster Assistance Loan Program.
- Bonding Program—The Surety Bond program (SBG) helps small business contractors who face obstacles acquiring surety bonds through the regular channels. The SBG program is a cousin to the SBA’s Guaranteed Loan programs. The SBA issues the bond on behalf of the small business so that the client (or one receiving the service) knows that if the contractor (the small business) does not fulfill its obligation, the surety (SBA) will assume the responsibilities of the contractor and ensure the job is completed.
- Small Business Investment Company (SBIC) Program—The SBIC program is comprised of SBICs that are privately owned and managed investments funds and licensed and regulated by the SBA. The SBICs are similar to venture capital with the major difference being that they limit their investments to qualified small businesses.
- SBA Recovery Act Programs—The American Recovery and Reinvestment Act of 2009 (Recovery Act) was signed into law by President Obama on February 17, 2009. The purpose of this act was to jumpstart the economy by supporting programs that would lead to the creation and preservation of millions of job. Small businesses are responsible for over 50% of the jobs in the private sector. The Recovery Act could not be considered an economic stimulus without consideration for small businesses. The SBA was granted $730 million to update its loan programs so that it could help more businesses. The ARC Loan and Microloan Programs are the two stimulus programs created as a result of the Recovery Act.
Your business plan will identify your resource needs. Understanding what you need will allow you to find the right program for you. Next week I will review the inner workings of the Guaranteed Loan Programs.
Additional Resources
SBA Programs: http://www.sba.gov/financialassistance/borrowers/role/index.html
SBA Loan Programs: http://www.sba.gov/financialassistance/borrowers/guaranteed/index.html
SBA Bonding Program: http://www.sba.gov/financialassistance/borrowers/surety/index.htm
SBA Venture Capital Program: http://www.sba.gov/financialassistance/borrowers/vc/index.html
SBA Recovery Act Program: http://www.sba.gov/recoveryq/index.html
About the Author
Jowanna Parris-Daley owns and operates jowanna inc™, a small business consulting company that offers business plan writing, website design and technology consulting services for startup businesses.
No comments:
Post a Comment