What is SBA

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What is SBA, how does it help small businesses in the United States?

What is SBA – If you are looking to build, grow and sustain a small business in the united States, I do not see why you should not pay keen interest to this guide, you will learn heartwarming facts that’ll aid your success in running a small business.

Are you aware there are over 31.7 million small businesses in America, according to statistics, these businesses make up a huge share of the U.S. economy.

What is SBA?

SBA means “Small Business Administration,” it helps Americans start, build, and grow businesses to great heights with the aid of viable resources ranging from financing, business advice, and top-notch idea on winning government contracts.

SBA was created in 1953 as a separate federal government agency with a view to aid, counsel, assist and protect the interests of small businesses, where it preserves free competitive enterprise, maintain and strengthen the economy of the United States.

There’s a burden on how SBA can help small businesses since they are great economic drivers, the financial wellbeing of Americans and America at large is of huge concern.

From here, future entrepreneurs will understand in clear terms what they can benefit from SBA while running a successful business in America.

How SBA helps small business in America

1. SBA helps small businesses to access loans

The Small Business Administration has always played an active role when it comes to helping small businesses in securing ideal loans via different funding.

It backs traditional loans issued by banks, and makes direct loans for disaster recovery. With this in mind, kindly understand that SBA grants specialized COVID-19 relief funds through 2021.

SBA does not offer loans to small businesses itself, it works with lenders instead to provide traditional loans.

However, businesses located in declared disaster areas may get loans directly from SBA.

SBA partners with lenders to get guidelines for loans, this makes accessing loan easy, some of these lenders include,

  • Community development organizations
  • Micro-lending institutions.

Small businesses working with SBA to make loan accessing easier, while lenders stand to reduce risks of giving out bad loans.

Types of SBA loan programs

7(a) Loans

What is 7(a) Loan?: This is the most prominent SBA loan program, which include financial assistance to small businesses on special requirements.

When real estate is involved, it’s termed the best option, however, it may also be used for,

  • Short and long-term working capital
  • Ideal for refinancing debt strictly on business ground
  • Ideal in making office purchases like; furniture, fixtures, and supplies
  • Construction/renovation of buildings
  • Establishing a new business/assisting in expansion of existing business

A small business can access a maximum loan amount of $5 million, significantly, for a business to qualify for this loan, what it does as a line of business comes under severe scrutiny.

Small businesses eligible for 7(a) loan

  • You must be running a business for a profit/profit making business
  • By SBA consideration of small business, you must fit in as defined
  • You must be doing business in the United States
  • You must have equity investment in the business
  • You should be using alternative financial resources
  • There must be a genuine need for loan which you must be able to demonstrate
  • You must indicate to use funds for sound business purpose
  • You must not be on existing loan/obligor to the U.S government

Requirements for 7(a) loan

You are required to gather necessary documents before you could start processing your loan, however, SBA will advise you with existing guidelines.

The following would be required from you,

  • Borrower information form: Complete a borrower information form, submit same to the SBA participating lender as advised
  • Background/financial statement: You are required to provide the background and financial statement of the business. These consist of SBA Form 912(statement of personal history) and SBA Form 413(personal financial statement) they serve as recipe for SBA and other lenders to access your eligibility.
  • Ownership and affiliations: You should provide a list of names and addresses of any subsidiary and affiliates to the business.
  • Business license or certificate of operation: Provide a copy of your business registration certificate
  • Loan application history: You should include record of any loan you have applied for in the past
  • Income tax returns: Include income tax returns of your business for the previous three years running.
  • Resumes: There should be a personal resume for each principal
  • Business overview and history: Include a copy of your business lease, where a note from your landlord can suffix with terms of your lease.

Where you are buying an existing business you are required to provide the following

  • Current balance sheet/profit and loss statement of the business
  • Federal income tax returns for three years running
  • Present the propose bill of sale, the terms inclusive
  • Include the asking price
  • Franchise, jobber/licensing
  • Proof of equity injection so far.

The 504 loans

The 504 otherwise known as the CD/504 loan is a facility that provides long-term and fixed rate financing to a maximum amount of $5 million for major fixed assets that promote business growth and job creation in the American economy.

Who offers the 504 loan?

The 504 loans are available through

  • Certified Development Companies (CDCs),
  • SBA’s community-based partners who regulate non-profit and promote economic development with their communities.
  • Kindly be informed that CDCs are certified and duly regulated by the SBA.

Who is eligible for the 504 loan?

  • Your business should be operating for profit in the United States
  • You must have a net worth of less than $15 million
  • You must have an average net income of less than $5 million after federal income taxes for two years before your application.

What the 504 loan can be used for

The 504 loan should be used on assets that attract and promote business development. Among these are purchase and construction of

  • Existing buildings
  • New facilities for the business
  • Long-term machinery and equipment investment/purchase

However, the 504 loan cannot be used for

  • Working capital or inventory
  • Consolidating, repaying or refinancing business debt
  • Investment or speculation in real estate whatsoever.

Requirements for application

  • The CD/504 loans are available through the CDCs, kindly find a qualified lender in your area and ensure you are dealing with one.
  • Present and assemble your loan authorization package using the 404 Authorization File Library where you will identify the requisite documents for your 504 loan.

The Microloans

The Microloan scheme provides facilities up to $50,000 to help small businesses and other non-for-profit childcare centers start up and expand their businesses.

Who is eligible for the Microloan?

Each of the approved lenders in this program have their separate lending requirements. However on a blanket note, intermediaries require a level of collateral as well as personal guarantee of the business owner.

What are the microloan facilities used for?

There are rules generally on how these loans should be used. In this case, Microloans are used for,

  • Working capital
  • Inventory
  • Supplies
  • Furniture
  • Fixtures
  • Machinery
  • Equipment

However, the Microloan cannot be used to set off debts or purchase real estate.

2. The SBA provides learning/education for Small Businesses to thrive

For example, there’s this SBA digital learning platform that’s designed to help small businesses run and operate in a way that guarantees growth, sustainability, and profitability.

There are rooms for learning proper business planning and marketing. With a well thought out plan at the nascent stage, SBA takes it upon herself to ensure you do not fail before you start.

The marketing aspect is solely SBA’s concern, without competitive analysis and in-depth market research the small business is bound to fail, SBA is always with you to avoid possible pitfalls at every step.

3. SBA helps Small Businesses to secure government contracts

Government contracts are usually not for amateurs and mediocre, quotations are being received from big companies and firms. Small businesses would usually fall out of favor in pitching and winning contracts, basically because they lack the requisite experience and techniques required for bidding.

SBA provides guidelines and techniques that ensures small businesses could equally be approved when they apply given certain compelling requirements.

Some of the possible criteria to fix going into a federal government contract include but not limited to

  • Assessing the business to ascertain its suitability with contract requirements
  • Requisite requirements for federal government contracts
  • Rules and responsibilities
  • Standards, subcontracting, etc.

Sequel to this, the small business gain access to work with established contractors and learn a firsthand idea on how to win contracts, this is made possible through the SBA contract trainings.

Related terms

What is SBA in the U.S.A, how does it help small businesses?SBA means “Small Business Administration”   The SBA helps Americans start, build, and grow businesses to great heights with the aid of viable resources ranging from financing, business advice, and top-notch idea on winning government contracts.  
How does the SBA help small businesses?The SBA helps small businesses by linking them up with partner lenders for loans, providing requisite training that grows and sustains businesses, provides enabling idea into winning federal government contracts with ease.
How does the us small business administration define small business in most industries?The SBA for most industries, defines a “small business” either in terms of average number of employees over the past 12 months, or average annual receipt over time.   Additionally a small business,   Is a profit making businessMust be operating in the USOperates within U.S. or makes primary contribution to the U.S. economy through tax remittance or use of American labor, products or materials.The business should be independently owned and operated and is not dominant in its field on a national basis. The business could be a sole proprietorship, partnership, corporation, or any other legal form.

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