Lending Alternatives for Small Businesses

Lending Alternatives for Small Businesses

May 09, 2022

One of the greatest challenges facing a small company is securing a loan or finding a venture capitalist to fund a planned expansion, modernization, or operation. Quite often, an initial stumbling block is knowing where and how to go about getting a loan. What many small businesses might want to consider is that the Small Business Administration (SBA) can be a creative team player when the need to seek out a small business loan arises.


The Small Business Administration

The Small Business Administration was established in 1953 to help ensure America’s small businesses are given an equal opportunity to grow and succeed. Because so many small businesses have a difficult time qualifying for bank loans, the SBA has become an integral part of many companies’ short- and long-term plans.


The SBA offers a variety of assistance programs designed to meet a wide array of small business needs. The SBA’s 7(a) LoanGuaranty Program is their primary lending mechanism. There are a number of smaller, specialized programs that also fall under Section 7(a) of the Small Business Act.


Some of the programs included under Section 7(a) are: loans for small businesses, loans for short-term and cyclical working capital needs, special loans for businesses engaged in international trade, loans for exporters in need of short-term working capital, loans for financing pollution control facilities, financial and technical assistance for small-sized, defense-dependent businesses, special assistance to minority and women loan applicants, financial assistance to employee stock ownership plans (ESOPs), surety bond guarantees, and special considerations for veteran loan applicants.


In addition to providing economic assistance, the SBA’s Office of Advocacy acts as a watchdog by ensuring that small business interests receive fair congressional, executive, federal, and state agency attention. The SBA also makes sure that small businesses receive fair consideration on loan applications, as well as government contracts and purchases.


Applying for an SBA Loan

A business whose loan requests are denied by conventional lending institutions may wish to consider applying for an SBA loan. Upon having its initial loan request rejected, the business should ask if its lender would consider making a loan under the SBA Guaranty Program. If the lender agrees to make the loan, the applicant will complete an SBA loan application for submission to the SBA. On the other hand, if the lender elects not to make a loan under the SBA Guaranty Program, the business can then apply for a direct loan from the SBA, provided the business satisfies the categorical requirements of one of the special loan programs.


If a business were interested in an SBA loan program, a good first step would be to contact one of the Small Business Development Centers (log on to www.sba.gov/local-assistance/resource-partners/small-business-development-centers-sbdc to find the center nearest you). Each center works in concert with its respective state governments in areas concerning economic development and small business assistance. They also provide counseling and training for established and fledgling small businesses. In addition, these centers can supply information on which type of loan program for which a business may qualify.


If you would like more information on how an SBA loan program could help you, visit the SBA website at www.sba.gov.


Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual or business owner.

This article was prepared by Liberty Publishing, Inc.

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