For small businesses to grow, they often need the same things larger enterprises do: loans, training in key areas, and other kinds of financial and operational assistance. But in an uncertain economy, when credit is tighter and obtaining capital can be difficult, where can owners of small businesses turn?
The good news is that there’s an organization already in place that’s designed to help. It’s called the U.S. Small Business Administration, and it focuses on helping small businesses obtain capital resources, counseling and contracts to help them grow and meet their short- and long-term needs.
The SBA is best known for working with financial institutions to guarantee loans to small businesses that may not otherwise qualify for them. Building on this, President Barack Obama signed the Small Business Jobs Act of 2010 last September, allotting a specific amount of funds, increasing the guaranty percentage on certain types of SBA-backed loans and reducing the fees normally associated with these loans.
The bad news is that the legislation appears to have been a victim of its own success. Initially the money trickled slowly into the market, but as things picked up the legislation was extended through December and demand quickly outstripped supply. As a result, the SBA isn’t accepting new applications for this program at the moment.
But that doesn’t mean you can’t take advantage of other valuable SBA programs. For example, the SBA provides other types of loans under specific programs designed to meet individual needs. There are a variety of ways to access these programs — some directly through an SBA-approved financial institution, and some through an intermediary, usually a not-for-profit entity focused on local economic growth.
Here are a few of the more common SBA programs small businesses can leverage:
• The 7(a) program is designed to provide financial assistance to businesses with special requirements. For example, businesses in rural areas, distressed communities, those who deal with foreign countries or exporters, as well as loans for those in active duty military or veterans.
• The microloan program is for very small borrowers, and the loans are short-term in nature. The maximum loan is $50,000, but the average loan is under $15,000. These loans are generally obtained through not-for-profit, community-based organizations with experience lending to small businesses.
• Disaster loans provide assistance to businesses affected by an event that has been declared a disaster. These are generally low-interest, long-term loans and can be used to replace real estate, personal property, inventory, machinery and equipment.
For more information, contact your community financial institution and go to the SBA’s Web site, www.sba.gov.
Louise Hanson provides a wide range of assurance services to financial institutions and other business clients. She’s based in Moss Adams’ Everett office and can be reached at 425-303-3037 or louise.hanson@mossadams.com.
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