Being an entrepreneur isn't cheap or easy. You've got think about inventory, labels, websites, maybe even ingredients if you're in certain industries. We all want to hit the lottery some day, but for now we wait. I've gathered a few resources to help you get the ball rolling with financial assistance for entrepreneurs.
Here are five of the most popular loan program options on offer from the SBA.
1. SBA 7(a) Loan Guarantee Program
This is one of the most popular and flexible federal loan programs. The 7(a) loan guarantee program is generally used to help finance startups or growing businesses and can be used to buy land, cover construction costs, purchase or expand an existing business, refinance existing business debt, and buy machinery, furniture, supplies or materials.
The SBA will guarantee up to $5 million for this type of loan. If you're looking for a loan of $350,000 or more through this program, the SBA will require your lender to ask for the maximum possible amount of collateral to offset the risk of default.
2. SBA 504 Loan Program
The 504 Loan Program is intended for businesses that will benefit their communities directly, either through the creation of jobs or by filling a much-needed demand in the local market. These loans are fixed-rate and intended for long-term financing, and the maximum value is set at $5 million.
Typically, when a 504 loan is funded, the lender will initially cover 50% of the borrower's costs at the outset and the SBA will cover 40%, with the borrower responsible for the remaining 10% of financing the project at the outset. The borrower must personally guarantee at least 20% of the loan.
3. SBA Microloan Program
The SBA’s microloan program is often used for short-term financial needs, like bolstering inventory or furnishing office space. The maximum amount for this type of loan is $50,000.
4. SBA Express Loan Program
The SBA Express program is a good option for business owners who need cash fast, as SBA Express applications are reviewed within 36 hours – though it may still take at least 30 days to receive funds. Loans of up to $350,000 are available to SBA Express financing applicants, but collateral may be required for loan amounts that exceed $25,000. An SBA Express loan can be used as working capital (five to 10-year term), as a line of credit (seven-year term), or commercial real estate loan (25-year term).
Businesses applying for the support of a federal loan program will have to engage the appropriate agency and go through the process of applying, which sometimes can take a while. It also means opening your financial record keeping to inspection and being prepared to divulge sensitive information to decision-makers within the program.
"[Entrepreneurs] should expect a careful financial review and be prepared with their financial documents, including a business plan," Dandridge said. "They should also understand that working capital and debt coverage are very important components in the evaluation."
Minorities and Women
Minorities and women have access to a wide array of resources under the Small Business Administration’s Office of Women’s Business Ownership program. The program includes a business directory, which links women business owners to national and local women’s associations that provide counseling, training and startup funding sources for women. Organizations that support minority groups, including women, such as the First African Methodist Episcopal Church, assist small-business owners in underprivileged regions around the Los Angeles district. Other minority assistance programs for business owners include Operation HOPE, which helps business owners working in underserved communities around the country.
For more resources click here: