Starting a small business takes time, hard work and money. Depending on the type of business and your present financial situation, you may need to reach to outside sources for funding.
One resource you can turn to for assistance in obtaining a loan to start or grow your business is the U.S. Small Business Administration (SBA). While the SBA does not directly lend money to small businesses, it can facilitate loans with third party lenders. Various banks, credit unions, community development organizations and microlending institutions throughout the U.S. partner with the SBA to provide funding to small businesses without access to other financing options with reasonable terms.
SBA sets specific guidelines for loans, which are made by its partners, and it guarantees that they’ll be repaid by the borrowers. This benefits small business owners by giving them access to much-needed funding — and it eliminates some of the risk to the lending partners.
To qualify for an SBA loan, your business must meet certain criteria in business size, financial standing, and other characteristics. You must also meet the credit qualifications of the lender.
Key advantages of SBA loans over conventional loans include lower down payments and longer repayment terms. Two SBA loan programs that benefit many small businesses are:
7(a) loan program — This is the most common type of SBA loan, and can be used for various purposes (such as satisfying short-term or long-term working capital needs; purchasing equipment, machinery and supplies; buying real estate; refinancing existing debt; and more).
Microloan program — This program provides loans up to $ 50,000 to help businesses with lower-amount financing needs. According to the SBA, the average microloan is approximately $ 13,000. Businesses may not use microloans to pay existing debt or purchase real estate, but can use them for working capital and purchasing inventory, supplies, furniture, equipment, machinery, etc.
The SBA also offers other loan programs. For information about them, visit the SBA’s Loan Programs web page at www.sba.gov/loans-grants/see-what-sba-offers/sba-loan-programs. You can also find more details about obtaining financing for both start-ups and existing small businesses on the SBA’s Borrowing Money for Your Business web page (www.sba.gov/starting-business/business-financials/borrowing-money-your-business).
To explore more potential sources of financing for your business, check out the SBA’s Loans and Grants Search Tool (www.sba.gov/content/find-grants). And consider reaching out to your local SCORE Chapter to speak with a mentor who can suggest a variety of lending institutions and organizations in your community. A mentor also can guide you as you prepare to approach lenders for funding.
For more insights about financing, plan to attend the free SCORE workshop “Financing Options for Small Business” scheduled Tuesday, April 11, 6:30 to 8 pm. Or take in next week’s Digital Advertising workshop on Thursday, March 23, 12 noon to 1:00 pm. Both are held at the Woodmere branch of the Traverse Area District Library. Seating is limited, so please pre-register at upnorthscore.com.
Rita Miller retired from PNC Bank in 2016 after a 30-year career in commercial banking helping businesses of all types and sizes meet their financials goals.