SBA is small business administration, a United States government agency that supports or indirectly provides funds to business by setting guidelines for loans which are then met with its lending partners, community development organization etc. It is designed to meet key financial needs, debt and equity financing, surety bonds.
The main aim of SBA is to help the nation’s economy and strengthening it by giving opportunities to either small business for expansion or for entrepreneurs wiling to strike a new business. The SBA does not directly provide loans but acts as a guarantor for bank loans. SBA also assists businesses to develop managerial qualities as well as with some technical and training issues.
SBA helps business in following ways:-
- SBA as mentioned earlier does not provide loans but guarantees that these loans will be repaid back.
- Borrower should choose the correct bank for finance through SBA, as the right bank can play a pivotal role between approval and denial of loan. This is due to the fact that some banks allow some relaxation in the SBA guidelines.
- The 7a regular program is one of the very well known initiative which provides loans through banks and non – bank lending institutions. The finance includes working capital, machinery purchases etc.
- The 504 program provides cash directly through non profit certified development companies. This provides funds for purchasing land or construction.
- Microloan program- through this program loan of upto 35,000 is available.
- Besides these there are also special programs meant for teens as well as for women entrepreneurs.
- There is a very possible way that SBA can help one as it has helped around 20 million businessmen worth more than $45 billion.
- SBA loans are subject to long term low interest rates to repair or rebuild a damaged property.
- Disaster relief loans in case of SBA are often approved within 21 days
Risks involved:-
- Keeping in mind that SBA still is a government program the process is a slow one, a strict one as well as many hurdles can occur on way to approval.
- SBA loans are only for start ups or for small business not the big ones.
- SBA loans require lot of collateral, credit worthiness, managerial capabilities, and equity contributions.
There are a few but quite risky factors involving SBA hence one should use it as a last resort and if possible try some other means of funding.
