Session 7: Financing
Module 7d: Business Funding Support
There are a variety of ways to fund a new business or raise funds for an ongoing business concern. These include both subsidized public agency programs, as well as private sector options.
Most funding comes from the entrepreneur / business developers themselves, and comes from their savings and other personal resources, and from their family and friends. Traditionally, the next level is from their local bank in the form of a bank loan.
In the public arena, the U.S. Small Business Administration (SBA) represents a government agency that offers a variety of programs that foster increased lending to small businesses. There are also a variety of regional and local programs that fund business ventures that offer such specific benefits as the creation of new jobs and related community enhancements. Private sector funding sources include Angel investors, venture capital firms and a wide variety of alternative funding options that support both startup and growth objectives. All of these programs may be found at www.BUZGate.org, select your state, then Free Help.
SBA Loan Programs
The SBA offers numerous loan programs to assist small businesses. It is important to note, however, that the SBA is primarily a guarantor of loans made by private and other institutions. Go to the SBA website to learn more about the following (www.SBA.gov):
7(a) Loan Guaranty Program
The 7(a) Loan Guaranty Program is one of the SBA's primary lending programs for businesses that might not be eligible for business loans through normal lending channels. The program operates through private-sector lenders, primarily banks, which issue loans that are, in turn, guaranteed by the SBA. Loan proceeds can be used for most sound business purposes including working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements, and debt refinancing (under special conditions). Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets.
Microloan 7(m) Loan Program
The Microloan 7(m) Loan Program was developed to increase the availability of small loans to prospective small business borrowers by providing short-term loans of up to $35,000 to small businesses and not-for-profit child-care centers for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment.
Patriot Express Loan
Launched in June of 2007, this pilot loan initiative is targeted toward veterans and members of the military community who want to establish or expand a small business. Learn more or contact your local bank to inquire if they provide loans that are, in turn, guaranteed by the SBA Patriot Express 7(a) Loan Program.
Disadvantaged Business Enterprise (DBE)
Any business that is majority owned, operated, and controlled by a citizen of the United States, or lawfully admitted permanent resident, that is Black, Hispanic, Native Americans, Asian-Pacific Islanders, Subcontinent Asians, or women regardless of race, may consider becoming a certified Disadvantaged Business Enterprise (DBE) in order to become eligible for doing business with government agencies and hundreds of national corporations who are looking to specifically do business with DBEs. To become certified, you will need to complete a Uniform Disadvantaged Business Enterprise (DBE) Application.
Small Business Investment Company (SBIC)
An SBIC is a privately owned and managed venture capital firm that is licensed and regulated by the SBA. SBICs are located across the country and use a combination of funds raised from private sources and money raised through the use of SBA guarantees to make equity and mezzanine capital investments in small businesses.
CDC - 504 Loans
The 504 Certified Development Company (CDC) Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A CDC is a nonprofit corporation set up to contribute to the economic development of its community or region. CDCs work with the SBA and private-sector lenders to provide financing to small businesses. There are about 290 CDCs nationwide.
SBA Export Working Capital Program (EWCP)
EWCP loans are targeted for businesses that are able to generate export sales and need additional working capital in the form of transaction financing to support these sales. The SBA delivers its export loan program through a network of SBA Senior International Credit Officers located in U.S. Export Assistance Centers throughout the country.
SBA CAPLines Loan Program
Short term loans and revolving lines of credit designed to support small business short-term and cyclical working capital needs. There are five types of CAPLine Programs: Seasonal Line, Contract Line, Builders Line, Standard Asset-Based and Small Asset-Based Lines.
Business Stabilization Program
As part of America's Recovery and Reinvestment Act of 2009, the SBA is offering loans to businesses that already have a bank-issued loan. The business can borrow up to $35,000 to make interest payments and pay down principal on existing debt up to six months. The loan is essentially interest free with no repayment for a year and full repayment in five years. Contact your local bank to learn if they are issuing this type of loan as the SBA will fully subsidize the interest and 100% guarantee the loan making it very attractive for the bank to work with you.
SBA Disaster Loan
If you are in a declared disaster area and are the victim of a disaster, you may be eligible for financial assistance from the U.S. Small Business Administration - even if you don't own a business. As a homeowner, renter and/or personal-property owner, you may apply to the SBA for a loan to help you recover from a disaster.
SBA Loan FAQs
Visit SBA Loan FAQs to learn how an SBA Loan Program works and where to apply (http://www.sba.gov/smallbusinessplanner/start/financestartup/SERV_SBALOANFAQS.html)
Federal Grant Resources
SBA grant programs generally support nonprofit organizations, intermediary lending institutions, and state and local governments in an effort to expand and enhance small business technical and financial assistance. The SBA does not offer grants to start or expand small businesses.
Vocational Rehabilitation
Specialized financial support may be available to individuals who qualify for support through state-based Vocational Rehabilitation programs and, at the national level, through veteran-oriented Vocational Rehabilitation programs. Check with your Vocational Rehabilitation counselor to determine what you may qualify for.
Other Financing Programs
There are a plethora of other programs at the Federal, state and local level. These programs are listed in www.BUZGate.org. Go to BUZGate, click on your state, select Free Help, and select Financing Programs.
Click here for the Financial Sources Worksheet.
Now - on to 7e: Financial Calculators
