Small businesses serve as the backbone to a nation's economy. They are the critical factor in ensuring the recovery and growth of any economy. Governments around the world are aware of the significance of small businesses and thus instituted programs that would encourage, assist and support this sector of the economy. In the United States, the government agency that is tasked to provide support to small businesses is the Small Business Administration (SBA).
If you think you have a good idea for a product or service that would sell, you should try to make a go of it. While it is true that it is difficult to start a business and that you will have to take some risks, there are steps that you can take to increase your chances of success. Be sure to do your homework before risking your lifetime savings on your new business venture. Study all that you can about the industry or line of business you want to enter. Look into the viability of your idea and test the feasibility of the business you have in mind. Write a business plan so you can put your many ideas into a cohesive plan of action.
There are many online resources that can be of big help during your planning phase. The SBA website (SBA.gov) is one valuable online resource and you may want to check it out first. The SBA's small business planner on the site provides highly informative material that can assist you at any stage of the business life cycle.
The Small Business Administration
The SBA was established in 1953 by the US Congress with the goal of maintaining and strengthening the country's economy by way of establishing small businesses, as well as assisting in efforts for economic recovery of those communities after disasters. The SBA's basic functions include aiding, counseling, assisting, and protecting the interest of small businesses.
Although many think immediately of loans when talking about SBA assistance for small businesses, the SBA by itself does not offer loans to small businesses. It has numerous loan programs, but the SBA acts only as a guarantor of loans made by private lenders and other institutions. The only loans that the SBA grants directly to borrowers are the Disaster Relief Loans.
Other SBA services include technical assistance, training and counseling in entrepreneurial development, women business ownership, Native American affairs, and international trade, among others. The SBA also provides assistance to businesses seeking government contracts. You should be able to receive support and assistance from the local SBA office near you.
If You Need Loans and Financial Assistance from the SBA
You will need to be eligible to apply under any of the SBA loan programs. Primary consideration is the repayment ability from the cash generated by the business. Other factors considered are good credit and character, management capability, collateral, and owner's equity contribution. All owners that have a stake of at least 20% in the business are required to personally guarantee the business loan obtained through the SBA.
There are several business loan programs being offered by the SBA but the most basic and common type of loan applied for by small businessmen is the 7(a) loan. The 7(a) loans are known as such because they refer to section 7(a) of the Small Business Act, which authorizes the SBA to provide business loans to American small businesses.
Most American banks and some non-bank lenders participate in the 7(a) program of the SBA. They provide the loans to small businesses following SBA guidelines in exchange for a guaranty from the SBA against payment default. However, the SBA does not fully guarantee 7(a) loans as a precaution against irresponsible decisions by the lender or misrepresentation by the borrower. Under this program, lenders arrange and administer the loans.
The SBA is committed to provide business guidance and support to help small businesses increase their odds of long-term success. You too can benefit from SBA assistance for small businesses. All you need to do is ask.
Armin Laidre, the author of this article, is a co-founder of iPlanner.NET, a Web-based business plan software provider.
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