If you own a small business, chances are you have heard about the SBA and small business loans. Here are some fast facts about the Small Business Administration, and how an SBA loan may help your small business access flexible funding to grow and succeed.
What is the SBA?
The Small Business Administration (SBA) is a government agency founded in 1953 and created to support hard-working entrepreneurs and small business owners in the United States.
The mission of the SBA is “to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters.” It can be summed up by “3 Cs”.
The first “C” is capital
The SBA offers loans and other funding programs for small businesses. SBA loans, which offer low rates and long terms, may be an excellent way to finance and grow your small business. The SBA doesn’t actually fund the loans, but they guarantee a percentage of each loan made by partner lenders like SmartBiz®. This guarantee reduces risk for partners who are more likely to help small businesses that can’t get access to conventional loans.
The SBA also offers additional funding programs, including:
The second “C” is contracts
Government contracts may be an important financial opportunity for small businesses. In fact, the U.S. government is the largest customer in the world, spending $665 billion a year in contracts for all types of products and services in both large and small quantities. The government is not only required by law to consider buying from small businesses, but wants to buy from small businesses to support economic growth, gain access to new ideas, and offer opportunities to disadvantaged socio-economic groups.
The SBA works with federal agencies in order to award 23% of prime government contract dollars to small businesses. And, through counseling and training, the SBA helps over 1 million small business owners compete for and win government contracts.
To get started, review the SBA Contracting Guide to assess your business, understand basic requirements, learn the types of contracts, how to win contracts, size standards, and rules and responsibilities.
The third “C” is counseling
The SBA Learning Platform offers programs designed to empower and educate small business owners every step of the way, whether you are looking to start a new business or expand an existing one. Online learning opportunities include:
- SBA’s Learning Center: Free classes to plan, launch, manage, market, and grow your business.
- Ascent for Women: Free learning platform for women entrepreneurs.
Development programs include:
- Boots to Business: Education and training for transitioning service members and their spouses.
- T.H.R.I.V.E. Emerging Leaders: Train. Hope. Rise. Innovate. Venture. Elevate. - An executive leadership training series to accelerate the growth of certain high-potential small businesses.
Additionally, the SBA has a nationwide network of district offices, Small Business Development Centers, Women’s Business Centers and SCORE chapters. Business experts offer counseling and training to numerous small business owners each year.
The requirements of eligibility for SBA loans are based on specific aspects of the business and its principles, and vary from lender to lender. Key factors outlined by the SBA include what the business does to receive its income, the business owners' credit score, the character of its ownership, and where the business operates.
If you are awarded an SBA 7(a) loan, you may use the loan proceeds to help finance a large variety of business purposes, including:
- Working capital
- Equipment purchases
- Adding employees
- Increasing marketing efforts
- Refinancing existing debt
SBA generally does not specify what businesses are eligible. Rather, the agency outlines what businesses are not eligible. (You can find a complete list here.)
SmartBiz and SBA Loans
For a loan from a bank in the SmartBiz network specifically, here are some guidelines on how SBA loans work. SmartBiz has dedicated Relationship Managers assigned to assist with each application process and can answer your questions.
- Businesses that qualify for a loan through a bank in our network typically have $50,000 to $5 million in annual revenue and 1 to 40 employees. Most are profitable and cash flow positive. All are able to show that they can afford to make our low monthly loan payments.
- Requirements include a minimum of 2 years in business, strong credit, no outstanding tax liens, no bankruptcies or foreclosures in the past three years, no recent charge-offs or settlements, no criminal record other than minor vehicle violations, and they are current on any other government-related loans.
- With an SBA loan, you may be able to get low interest rates on a minimum of $30,000 and a maximum loan amount of $350,000 with a 10-year repayment plan and low monthly payments.