Taking Full Advantage of The SBA

The SBA, small business administration can be used for much more than just a source of financing. The SBA is dedicated to providing help in various forms of resources to small business startups. They have many resources that can help a business start and grow. The SBA can be an excellent source of information and free resources which can help you with tasks such as putting together a business plan, teach you about marketing and selling as well as provide valuable tools and guides regarding several aspects of starting and growing your business.

Apart from actually providing you with finance, the SBA also provides information and assistance that can help you financing from not only themselves but also from other commercial boost your chances of actually qualifying for a business loan from another bank.

For more information on SBA programs visit the SBA’s website at www.sba.gov. You can also call the SBA at their helpline on (800) U-ASk-SBA. You can also make personal contact with your local SBA district office by finding out one near you. Your SBA district can mail you a startup booklet as well as a list of lenders and inform you if some kind of financing is tailor-made to suit your industry and your business need.

The counselor from from the SBA can tell you where to go for help regarding different aspects of your business such as making a business plan, creating financial statements etc.

Government Business Loans – Special Loans

Special Purpose Loans from the SBA ( Small Business Administration)

It is possible to have a business that has a special need which is not covered in any of the specified SBA loan programs. Under such circumstances, it is possible to approach the SBA to get some extra help with financing. In many situations the SBA might already have a loan program which is suited to your out of the ordinary business.

For example, the SBA has a pollution control loan meant for businesses that are planning, designing or installing a pollution control facility. This facility must prevent, reduce, abate a control any form of pollution including recycling. This loan program is perfect for businesses that are going to pollute the environment as a part of their manufacturing process but wants to take adequate measure to minimize or negate the environmental side effects of the business.

Another example of a special SBA loan is the international trade loan program. If you want to promote your business actively in international trade this is something that you can look into. The SBA can guarantee up to 1.75 million for a combination of fixed asset financing which improves your facilities and equipment as well as export working capital program assistance. Both the fixed asset quotient of the loan as well as the non-fixed asset portion cannot exceed $1.25 million each in the guaranty.

SBA website also claims that a number of variations of the SBA’s basic loan programs can be made available to support special business needs. So if your business has one such genre, it might be possible for the SBA to fund additional loans to you.

Government and Private Grants for A Business

How to go about getting a grant for your business from the government or private institutions.

It is a tough prospect to get a grant for a business. It is lengthy, complicated, requires a lot of work and so many people do not even consider getting a grant for their business. More so ever, most of the entrepreneurs do not even consider the possibility that there may be a grant available for their business. Let us speak about it a little more and see why this is not something that you should totally ignore and at least consider as an option. When people think of grants from the government or from private trusts and organizations, they think of nonprofit organizations getting them. There is nothing wrong with that image. However, there are grants available for the right kind of businesses as well and you will have to find them. First of all you need to consider the kind of business that you are in. Usually, the business has to serve some kind of a purpose in the interest of the society, country or future growth and development in a vital sector of industry in order to qualify for a grant. However, do not be discouraged just yet because you feel your business does not fit in. You need to learn about business grants a little more. Grants are available in all fields ranging from art to biotechnology.

An extremely good source to find the all information about grants is the annual The Grants Register (published by Pal grave-Macmillan. This book has information on pretty much all the grants that are to be found in the USA, listing thousands of them, all in on place.

The most common place to look for an infusion of cash in your business as a form of the grant is through the government. However, many grants are available from private foundations trust and even some corporations. Some examples of government based grants given to businesses include National Institute of Standards and Technology’s Advanced Technology Program which offers grants to go from high risk and high payoff projects that benefit American industry. Whatever the business project is, it is going to be scrutinized carefully by a board of experts associated with the grants commission.

The Small Business Innovation Research Program is the government grants program that specializes in small businesses looking for funding for high-risk technologies. However, in this program you need to meet the research and development needs of the federal government.

If all this sounds too complex and highflying for you, you should once again understand that grants can be available in a various set of fields and industries. You can check out the website www.grants.gov which lists all federal government grant programs. You will be able to find opportunities in fees ranging from arts and humanities to science and technology.

Finding a grant is one things and getting it is another. It usually takes a long time and involves putting out a lot of paperwork and working through many organizations. Applying for grant also usually requires writing out an extensive essay on why you need the money and what you hope to accomplish with the infusion of the money. In many circumstances, the organizations giving the grant look for a higher purpose rather than just making a profit. The business should ideally serve some purpose that has something to do with innovation of future technology, contributing to the growth of the economy of the country, enhancing the future, lifestyle and potential of people etc.

You can find professional grant brokers and writers who are in the business of helping business find grants. The grant writers usually charge $25-$100 per hour depending on their level of expertise and how successful they have been in the past. You have to pay this fee regardless of whether or not these contractors are able to help you secure the grant or not. If you’re a decent writer yourself and do not mind doing an extensive essay on a business, researching grants, filling out forms and dealing patiently with various organizations, then you can handle the process of finding and applying for grant yourself.

If you feel that your future business can contribute to community development or empower a particular group of economy, trade or disadvantaged people, you should pay a visit to your state economic development of this to find out what type of community development grants are available.

Government Business Loans – Export Working Capital Program

This is a loan program that can be explored by a business that is trying to export its goods. The export working capital program allows a 90% guarantee on loans up to $1.5 million. The tenure of the loan depends on whether the loan is a single transaction or our revolving line of credit. For a single transaction loan the maximum loan term is 18 months whereas for a revolving line of credit the loan matures typically after 12 months with an option for renewal usually open.

The loan can be taken for a single export incident or multiple export sales and can be used for pre-shipment working capital or post-shipment exposure coverage. This loan cannot be used to purchase fixed assets for the business.

Government Business Loans – 8(a) Loan Program

This loan program by the SBA is meant for businesses that are certified as socially and economically disadvantaged. This loan program is meant to boost such businesses by giving them access to government contracts as well as providing assistance in terms of management and technical know-how. The 8(a) loan program is only meant as a boost and startup businesses that face social and economic disadvantage as they can only be a part of it for 9 years after which they must exit the program.

Entrepreneurs and businesses who participate in the 8(a) program are automatically eligible for the 7(a) guaranteed loan and the prequalification program by the SBA.

The business mostly owned by a socially and economic disadvantaged individuals which includes categories of race, ethnicity, gender or physical handicap. To qualify as economically disadvantaged the person must have a net worth of less than $250,000 as well as 2 years worth of tax returns.

Federal Benefits of Empowerment Zones/Enterprise Communities for A Business

Benefits government gives a business for starting in an Empowerment Zones/Enterprise Communities

More than 35 states have established enterprise zones since the year 1980. The states offer benefits and other incentives to businesses that start in certain areas and zones that are called and consider the economically disadvantaged. Different states designate different number of areas as empowerment zones and also offer different benefits. Some states might offer lower utility rates while others may offer low interest financing.

The main requirement for a business to qualify for these benefits is that the presence and operation of the business should serve a social purpose and offer help in the revitalization as well as improvement of that community and economic zone. For example if the business is expected to create and maintain new jobs, it may be able to to qualify.

The Empowerment Zone/Enterprise CommunitiesInitiative was started to stimulate investment and development in areas that were considered to be economically backward. Specific urban and rural communities have been identified and businesses that start in this area will receive tax benefits as well. Because the federal government is also involved, the entrepreneur in these areas will not only get state tax relief but also federal tax breaks.

However, while this is an advantage to starting in empowerment zone, you have to watch out for a lot of things before starting a business. While getting benefits from the government in terms of tax relief and a low interest financing is an obvious advantage, you do need to figure out if there is an ample availability of resources to make your business work such as availability of the workforce and more importantly your target market. In certain cases if you are a manufacturing unit, you do not need to worry about your target market because you will eventually be supplying to retailers and customers in another area.

You should also ensure that the zone offers support services like streamlined licensing and permitting procedures. The place should have a good infrastructure to support a business. For example, if your business requires the shipping of goods and raw materials to manufacture, you might want the zone to be connected with a good highway system, railroad and even by air. If you are looking to get benefit is by starting a business in an empowerment zone on the basis of creating new jobs for the economically impoverished community, you need to ensure that the area has trainable labor force.

For more information on enterprise zones contacted state’s economic development department or call HUD’s office of community renewal at the following number, 202-708-6339.

Government Business Loans – 504 Loan Program

504 Loan Program is a Federal loan program for relatively larger business needs.

This loan from the Small Business Administration, SBA provides long-term fixed-rate loans for financing fixed assets which are usually real estate and equipment. These loans are usually for a larger amount and are most often used for growth and expansion of the business.

504 loans are usually made through certified development companies, CDCs. CDCs throughout the country each having an assigned region.CDCs work with SBA, banks and businesses looking for financing and are nonprofit intermediaries.

If you are seeking a loan up to $1.5 million to buy building or put in some of the equipment you can consider a CDC for your business loan. You’ll need to present the CDC with a business plan and financial statements. Typical percentage of this type of packages that 50% is financed by the bank, 40% of CDC and 10% by the business itself.

The one condition that is attached to a CDC business loan in exchange for the below market and fixed rate financing is that your business should serve some public and social goals as well. The CDC expects the business to create or retain jobs or meet some public policy goals such as rehabilitation of an under developed economy area.

Businesses that meet these public policy goals are usually those whose expansion will contribute to a business district gift revitalization such as empowerment zone, a minority owned business, and export or manufacturing company or a company that will contribute to rural development.

Government Business Loans – MicroLoans Program

Microloans Program is a federal business funding that caters to very small business loans.

Small Business Association, SBA can also help entrepreneurs who require very small amount of business loan under their micro-loan program. A business can get a loan ranging from hundred dollars to $35,000 under this program. This loan also can be used for a multitude of purpose such as purchase of machinery and equipment, furniture and fixtures, inventory of supplies and working capital. The only limitation is that this loan cannot be used to pay off existing debts. Once again, the micro-loan program assists the borrowers who do not meet traditional lenders credit standards.

Just like the prequalification program, microloans are administered through intermediary organizations. The difference is that these organizations are nonprofit intermediaries and receive loans from the SBA and are responsible in turn to make loans to qualified entrepreneurs. Small businesses that apply for micro-financing may also be required to complete some business skills training before the loan application can be reviewed.

The term for a micro loan is usually short. However, the loan maturity term and the interest rate can differ according to the amount borrowed as well as the purpose it is taken for. Microloans usually take less than a week to process.

SBA Pre Qualification Program

This SBA’s Prequalification loan program helps to pre qualified low income borrowers, disabled business owners, veterans, exporters, rule entrepreneurs and specialized industries.

Under this program the business owner can apply for a loan of $250,000.

There are private intermediary organizations who are connected and chosen by the SBA. The process dictates that business owner submits the business plan and completed loan application with these intermediary organizations who further submit the application to the SBA.

If the application is approved, the SBA issues you a prequalification letter which you can take along the loan packet to a commercial bank. The usefulness of the prequalification letter is that the bank is more likely to approve of your loan with the SBA’s backup guaranty attached.

Government Business Loans – CAPLines

CAPLines Business Loans from the SBA (Small Business Administration)

The SBA has another specialized loan for business that needs working capital, short-term or cyclical basis. These loans are called CAPLines. The CAPLines business loans come in 2 forms which are evolving and non-revolving. A revolving loan can be thought of as any other revolving accounts such as a credit card where the amount you can borrow is a set by an upper limit and you can charge and borrow as much as you require within that limit. The balance of this loan account keeps going up and down depending upon your expenditure and payment. Non-revolving lines of credit mean that the borrower is given a fixed flat amount which is supposed to be over a specified period of time.

SBA CAPLine will also provide short-term credit to business owners and guarantee the loan amount up to $1.5 million. There are 5 kinds of line of credit programs that operate under the CAPLines program.

Seasonal line of credit. This kind of loan is given to businesses to help them face peak season when they face an increase in inventory, accounts receivable and operating costs.

Contract line of credit. This kind of a business loan is provided to finance labor and material cost involved in carrying out contracts.

Standard asset-based line of credit. This kind of business loan is given to business owners who cannot qualify for long-term credit and provides financing for cyclically, growth, recurring and short-term needs.

Small asset-based revolving line of credit. This business loan provides smaller asset-based lines of credit up to $200,000 with the requirements not being as strict as the standard asset-based program.

Builders line of credit. This business loan is given to meet the cost of labor and material for general builders and contractors who are either renovating or building are new commercial or residential building.

Each of these 5 credit loans has a 5 year maturity but that can be adjusted according to the borrower and business needs.