In the United States, many entrepreneurs get SBA loans to start or grow their businesses. While these loans are issued by private banks, the U.S. Small Business Administration (SBA) guarantees a percentage of each loan. What this means is that if you, the entrepreneur, default on the loan, the bank only loses a small percentage of the money it lent you (the U.S. government pays the rest).
Because of this guarantee program, it’s much easier for entrepreneurs like you to get SBA loans — as the bank doesn’t need to bear all the risk themselves. Without the program, banks wouldn’t make as many loans, and fewer businesses would get funding.
When small businesses grow, everybody wins! According to Karen Mills, current head of the SBA, its job is to make sure that small businesses have all the tools they need to grow, stimulate the economy, and create new jobs.
Small business funding challenges
But as you may have noticed, business owners are still having trouble getting access to capital, namely 1) Small dollar loans, and 2) Loans in the niche industries affected by recession, such as real estate, finance, etc.
If you think about it, most small businesses don’t need $1 million or even $500,000, and wouldn’t even know what to do with it all. In many cases, even $50,000 can go a long, long way towards boosting revenues (or even doubling them) if invested in more lead generation campaigns, building a sales team, etc.
The odds are you can suffice with a smaller loan amount. In the past this has been more difficult because banks are geared towards extending larger loans since they can earn more interest for the same amount of due diligence per loan.
What the SBA is doing for small businesses
The SBA recently launched two loan-guarantee revisions that simplify and streamline paperwork even more for banks and borrowers.
One of them, the Small Loan Advantage program, is off to a strong start. It allows banks to make loans at more affordable rates, and brings more opportunities to borrow smaller loan amounts, like $50,000 to $100,000 or even less….which is great if that’s all you need!
Applying for a small SBA loan from banks
To take advantage of this for yourself, find out which local bank makes the most SBA loans. You can often find this information on the bank’s website. Or you can visit the branch or call them. Ask them how many SBA loans they make and how often they fund loans in the dollar range of what you need.
Find the local bank that is most active in the SBA loan program and apply for a loan. If the bank says you’re not ready for the loan, ask them why. Then figure out how to address the issue so you can go back later after resolving the concern.
The United States Small Business Administration wants you to succeed as an entrepreneur and business owner. Because when you do, you will create jobs and stimulate the economy. So consider SBA loans as a funding source; they might be just right for your business.
Suggested Resource: Want funding for your business? Then check out our Truth About Funding program to learn how you can access the 41 sources of funding available to entrepreneurs like you. Click here to learn more.