The Paycheck Protection Program has brought the US Small Business Administration to prominence recently, but this government organization has been assisting small businesses for decades. From small company loans to counseling, the SBA offers a wide range of services that entrepreneurs should take advantage of.
The Small Business Administration (SBA) has been instrumental in getting funds into the hands of struggling business owners around the country. Let’s see some exciting advantages of working with the SBA.
What is the Small Business Administration (SBA)?
The Small Business Administration, or SBA, was established in 1953 by President Dwight D. Eisenhower and is responsible for assisting, consulting, and safeguarding the interests of small business owners. The SBA was established as an independent government agency in recognition of the important role small businesses play in the economy. Its mission is to be the voice of small company owners and to defend the economy. The Small Business Administration’s mission also requires the agency to ensure that small firms receive a fair proportion of government contracts.
The Small Business Administration’s (SBA) assistance to small enterprises does not end with the agency. It helps small businesses by providing grants and partnering with other NGOs, such as its approximately 900 Small Business Development Centers and more than 100 Women’s Business Centers. SCORE, a nonprofit network of business consultants, is also a partner of the SBA.
A glance at what SBA does?
- The Small Business Administration (SBA) is a US federal agency that assists small enterprises and startups.
- The Small Business Administration (SBA) assists people in starting small enterprises, obtaining governmental contracts, and providing managerial and financial advice.
- The Small Business Administration has a number of loan programs that businesses can look into and apply for after determining their eligibility.
The benefits of the SBA Loans to businesses
Access to financing has traditionally been one of the most important benefits of the SBA. That was true before the epidemic, and it is much truer now, with the coronavirus still doing havoc. With its catastrophe financing programs, the SBA has played a critical role in the economy during the pandemic. With small businesses accounting for 44 percent of all economic activity in the United States, forgiving small business loans has proven vital to the community.
The Paycheck Protection Program, which provides small business owners with forgiving loans if they use the earnings to keep their employees on the payroll, has been particularly popular. Meanwhile, the SBA’s COVID-19 Economic Injury Disaster Loan provides low-interest loans that can be paid back over 30 years.
The SBA offers a variety of funding options in addition to PPP and catastrophe loans. Here are a few examples:
7(a) loan from the Small Business Administration
Small firms can borrow up to $5 million for short- and long-term working capital to repay expensive debt or buy equipment and supplies using the SBA 7(a) loan, the most popular SBA loan program outside of the PPP. The loans are provided by an SBA-approved bank or lender. The SBA ensures 85 percent of loans up to $150,000 and 75 percent of loans over $150,000 for SBA lenders.
The loan program, which is named after Section 7(a) of the Small Business Act, is versatile since it can be used for a variety of purposes, including the purchase of equipment or machinery, working capital, and debt financing.
504 loan from the Small Business Administration
The SBA 504 loan is a fixed-rate, long-term loan that can be used to repair or upgrade assets as well as develop a business. The funds can be used to upgrade and update parking lots, landscaping, and existing facilities, as well as for existing structures or land, new facilities, and long-term machinery and equipment. Working capital, inventories, debt refinancing, and speculative investments, such as rental real estate, are not eligible for the loan.
Licensed Development Companies (CDCs), which are NGOs certified by the Small Business Administration to cooperate with lenders to offer funds to small companies in their areas, are eligible to apply for these loans.
Microloans
Small enterprises and some not-for-profit child care organizations can borrow up to $50,000 in microloans from the SBA to help them get started or expand. The average microloan, according to the SBA, is $13,000. The SBA distributes the monies to certified intermediate lenders, who are nonprofit community-based groups that handle microloans.
The loans are governed by several microloan lenders. Non-profit organizations and those with experience offering technical help to small firms and funding small loans are among the lenders.
Other Business Advantages of SBA
Access to capital, company growth, government contracting, and advocacy are the four categories of services provided by the SBA. All of them are intended to help small business owners in various ways.
1. Access to capital
SBA loans are by far the most popular service offered by the SBA, as they give business owners capital at low interest rates. They’re made for entrepreneurs who might not be able to get a bank loan. The idea is to get money into small business owners’ hands so they may expand their businesses, hire more people, and keep the economy humming. The SBA’s capital options include everything from equity investment capital to microloans. To be considered for a loan, businesses must complete the SBA loan application.
2. Growth of the company
Small business owners may be excellent at what they create or do, but they aren’t necessarily expert accountants or marketers. In more than 1,800 small business centers across the country, the SBA offers free counseling and low-cost training. Through its Small Business Development Centers, Women’s Business Centers, and the SBA’s relationship with SCORE, the SBA Office of Entrepreneurial Development oversees the counseling and training programs. The SBA’s free online Learning Center is operated by the Office of Entrepreneurship Education, as is the Emerging Leaders program, which is an intense executive-level training series oriented toward small business leaders.
3. Contracting with the government
At its foundation, one of the SBA’s purposes was to ensure that small businesses had access to government contracts, and this is still its primary duty today. It collaborates with other federal departments and agencies to ensure that small companies receive 23 percent of government contract monies.
4. Advocacy
The economy’s backbone is made up of small companies. Whether it’s evaluating legislation, assessing the impact of regulations, or speaking before Congress on behalf of small companies, the SBA represents their interests to lawmakers and rivals.
5. Flexibility of Use
Some types of company loans, although not all, come with restrictions on how you can utilize the funds. That isn’t necessarily a negative thing—after all, if you ask for equipment financing or invoice financing, you’re looking to fund a very specific need.
However, there are situations when a business owner just requires funds. You should always have a thorough strategy for what you want to do with your small business loan—and you won’t get approved for one unless you do—but things happen and things don’t always go as planned. It’s also good to have some flexibility.
How to Access SBA Resources
Remember that the SBA is a government entity – they won’t dole out any loans. Yes, they minimize the risk for the lending party, but they primarily intend to serve small business owners. One of SBA’s key aims is to help entrepreneurs grow as swiftly as possible through access to industry-leading education and capital. So when go for SBA loans, you also receive access to a network that’s excellent for mentorship and training opportunities. The network is linked to departments like Office of Women’s Business Ownership, SCORE, and more.
Conclusion
Small businesses that want cash for expansion, inventory, buildings, equipment, exporting, and other purposes might profit substantially from SBA-insured loans. SBA-guaranteed loans were used by some of the country’s most successful enterprises when they were just getting started. Is it possible that you will be the next SBA success story?
The Small Business Administration (SBA) is here to help small businesses get started, prosper, and grow. Small business financing programs are an important aspect of how we help small businesses. Local- and state-level SBA offices also hold networking events often to connect with SMB owners.