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Business plans for SBA loans can be a genuine challenge.
The good news is that the SBA really does provide funding for small businesses. Small business loans through the SBA were created to provide an impetus to the development of small business in the U.S. Surprisingly, SBA loans work extremely well.
Not only do SBA small business loans work well, but there is a lot of money in the SBA coffers right now: $16 billion, in fact. Take your best shot at putting some of that into your own small business.
There are a lot of SBA loan programs for small business, from micro loans to government contracting. Take the time to study the SBA Website -- it's easy to get lost in the maze of small business loan programs and services, but it will be time will spent.
Contrary to popular opinion, the SBA does not offer business grants. Rather, it provides small business loans to small businesses, especially those that would have difficulty obtaining a business loan other ways.
For those who qualify for grants, see our Business Grants page for links to thousands of listings for business grants.
Also check our discussion on Resources for Women and Minorities -- the SBA has some excellent programs for women and minority entrepreneurs.
The SBA 7(a) Loans
This is the major loan program in the SBA. It may be used for start-up, expansion, equipment purchases, working capital, inventory or real-estate acquisition. The SBA will guarantee up to $750,000 of a bank loan. Interest rates are negotiated between the applicant and the bank. Here is where business plans for SBA really shine.
The SBA administers two particular business assistance programs for small disadvantaged businesses (SDBs). These programs are the 8(a) Business Development Program and the Small Disadvantaged Business Certification Program.
While the 8(a) Program offers a broad scope of assistance to socially and economically disadvantaged firms, SDB certification strictly pertains to benefits in Federal procurement. Companies which are 8(a) firms automatically qualify for SDB certification.
One of the outstanding programs offered under 8(a) is the Mentor/Protege Program which matches small and disadvantaged firms with those that are larger and more successful. Sometimes there are mentors who can assist with business plans for SBA funding.
Low Documentation SBA Small Business Loans
Small businesses looking for less than $150,000 may qualify for a "low doc" loan, which simply means less paperwork.
The Express program encourages banks to make more small business loans to small businesses directly (i.e., without SBA direct involvement). Under this program, banks themselves approve loans up to $150,000, and can even include revolving lines of credit. Business plans for SBA funding will speed the process along.
Under this program, it is the SBA that does the determination for a loan. Certain applicants -- such as veterans, minorities, exporters, rural small business owners and certain specialized businesses -- can be "prequalified" by the SBA before they approach a bank. The SBA judges the applicant on character, credit, experience and reliability rather than assets. May be for loans up to $250,000.
SBA small business loans for up to $35,000 on a short term basis. May be used for inventory, supplies and working capital.
The SBA guarantees loans up to $750,000 for the cyclical and short term needs of businesses, such as seasonal purchasing, builders, and asset-based lending. Business plans for SBA funding are essential here.
504 SBA Loans
The 504 program provides long-term, fixed-asset financing through certified development companies. May be up to $1 million.
Physical Disaster SBA Loans
Any company that is located in a federally-declared disaster area may be eligible for up to $1.5 million in loans to return the business to pre-disaster status.
Community Adjustment and Investment (CAIP)
These loans are intended to create new, sustainable jobs and preserve existing jobs in businesses at risk due to changing trade patterns with Canada and Mexico.
Export Working Capital Program
Short term loans for export-related transactions. The SBA will guarantee up to 90% of a secured loan or $750,000.
International Trade Loan
Both short and long term financing for companies involved in exporting. Up to $1.25 million can be guaranteed.
Pollution Control Loan
Businesses that design, build, install or service pollution control facilities may be eligible for up to $1 million in SBA guarantees.
These are only the major programs. There are others!
With the myriad of options available, my best recommendation is to make an appointment with a loan specialist your local SBA office. Explain your circumstances and see what the loan specialist recommends. Whether your loan is reviewed entirely by the SBA, entirely by the bank, or both, and the likely conditions of that loan, all have direct impact on the style of business plan you will want to create.
What do FEDEX, AMERICA ONLINE, OUTBACK STEAKHOUSE, APPLE COMPUTER and COMPAQ COMPUTER CORP. all have in common? They all started with SBA loans.
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