How SBA can help small business owners
by jeffrey d. arsenault, Window Shopper
- Created: October 17, 2013, 12:56 pm
Small business owners just starting out may find it difficult to get initial capital for their business ventures. Unless they have saved enough money for it, they may have to get their money from other sources. SBA offers small businesses with access to various financial assistance programs that are designed to address the needs of small business, especially in debt financing, equity financing and surety bonds. Although the agency does not give direct loans, it can help facilitate your loan with third party lender, act as guarantor of a bond, or help you find capital. How SBA helps Since SBA sets the loan guidelines for lenders and micro-lending institutions, it can help small business to apply for a commercial loan based on the requirements they have made, with them as guarantor. With an SBA guarantee, lending partners are assured that the loans will be repaid which helps minimize the risk to the lenders. These loans are granted only to businesses that do not have access to other sources or financing companies. This is SBA’s guaranteed loan program or debt financing scheme. Another way, if a small business owner cannot secure surety bonds through regular channels, SBA can help through a bonding program, known as Surety Bond Guarantee program. This program involves three parties: a surety, the contractor and the project owner. A surety bond binds a business owner to comply with the contract and if he fails, the surety will assume responsibility and ensure that the project is done. In most cases, SBA acts a surety in the agreement where it will shoulder a fraction of the loss when a business owner fails to meet the terms of the agreement. To sureties, an SBA guaranty is binding enough to ensure that the contractors are credible and eligible to avail of financial assistance. Contractors may avail of the SBA bonds from $5 million to $10 million. On the other hand, a small business may also take advantage of the venture capital program through SBA’s Small Business Investment Company (SBIC) program. SBA looks for qualified small businesses that are in need of debt or equity financing. This program may help small business owners who need growth capital provided they meet the requirements of the program.
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