What
do FedEx, America Online, Outback Steakhouse, Apple Computer, Staples
and Compaq Computer Corp. have in common? They all started with SBA
loans.
"The most difficult thing is
the decision to act, the rest is merely tenacity. The fears are
paper tigers. You can do anything you decide to do."
Amelia Earhart, Adventurer
Business Plans for SBA
Loans
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.
Major
SBA Small Business Loan Programs
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.
8(a) Programs
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.
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.
SBA Express
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.
Prequalification
Program
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.
7(m) Microloans
SBA small business loans for up
to $35,000 on a short term basis. May be used for inventory, supplies and
working capital.
CAPLines
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.
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.
