Small Business Administration

General Introduction

The U.S. Small Business Administration (SBA) has provided capital, contracts, and counseling to small business owners since 1953. The agency's website presents in-depth guidance on business planning, start-up, management and exit strategies, SBA services, useful tools, and local resources. With the links provided here, this wealth of information is just a few keystrokes away.

Starting and Managing a Business

The SBA has all the information and resources you need to launch and run a successful small business. From writing a business plan, to finding a mentor, to learning about financing and business regulations, a novice entrepreneur can get a great start by accessing tools on this site. Resources are also provided for successful management and growth.

Of particular interest is the Small Business Readiness Assessment Guide, designed to help novice entrepreneurs learn if they are ready to start a small business. Responses are scored automatically, followed by a brief analysis.

The Plan Your Business section covers the following topics for helping an aspiring business owner plan his/her business: market research and competitive analysis, writing a business plan, calculating start-up costs, funding a business and buying an existing business or franchise. The Launch Your Business section offers information on information on getting started: picking a business location, choosing a business structure, choosing a business name, registering a business, getting federal and state tax ID numbers, applying for licenses and permits, opening a business bank account and getting business insurance. The Managing Your Business section covers managing finances, hiring and managing employees, paying taxes, staying legally compliant, buying assets and equipment, marketing and sales, preparing for emergencies and closing or selling a business. Finally, the Growing Your Business section has information on getting more funding, expanding to new locations, merging and acquiring businesses, becoming a federal contractor and exporting products, as well as additional assistance for women-owned businesses, Native American-owned businesses, Veteran-owned businesses and LGBT-owned businesses.

Loans, Grants and Other Funding Programs

When you are ready to consider financing products for your small business, the SBA will guide you through the best options available for your company and location. Subjects include financing through SBA loan programs, government grants, bond options, and venture capital or other financing options. There’s also information on low-interest loans for small business owners affected by natural disasters.

7(a) Loan Program

The 7(a) Loan Program – SBA’s most common model – provides financial help for businesses with special requirements. The specific terms of all loans are negotiated between a borrower and an SBA-approved lender.

An applicant’s eligibility is based on the nature of the company and its principals, how it earns income, the owners’ character and company location. While SBA does not determine eligibility per se, it does require certain universal criteria. A business must:

  • Meet the SBA definition of small business
  • Demonstrate a need
  • Be for-profit
  • Engage in – or plan to conduct – business in the U.S. or its territories
  • Demonstrate reasonable invested equity (time or money)
  • Exhaust all other financing options
  • Use loan revenues for sound business reasons
  • Be in good standing regarding all debt obligations to the U.S. government

There is a long list of ineligible businesses, as well. These include most financial companies, insurance firms, government-owned entities, foreign-owned businesses and many more.

There are several types of 7(a) loans designed to address different business needs.

A standard 7(a) loan is for up to $5 million, with the SBA guaranteeing 85% loans up to $150,000 and 75% for loans greater than $150,000. Loans up to $25,000 do not have to be collateralized. For loans in excess of $350,000, the SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount. If business fixed assets do not “fully secure” the loan the lender may include trading assets (using 10% of current book value for the calculation), and must take available equity in the personal real estate (residential and investment) of the principals as collateral.

A 7(a) small loan is for loans up to $350,000. An SBA Express loan is for loans up to $350,000 that require a faster turn-around, within 36 hours.

The Export Express program provides exporters and lenders a streamlined method to obtain SBA-backed financing for loans and lines of credit up to $500,000. Lenders use their own credit decision process and loan documentation. The SBA will respond to an application within 24 hours. Export Working Capital loans are for businesses that can generate export sales and need additional working capital to support these sales. Lenders review and approve applications and submit the request to the U.S. Export Assistance Center location servicing the exporter's region.

International Trade loans provide long-term financing to businesses that are expanding because of growing export sales, or that have been adversely affected by imports and need to modernize to meet foreign competition. Businesses can use International Trade loans for fixed assets for construction, building, real estate equipment, and for working capital for export transactions.

Under the Preferred Lenders program, the SBA gives select lenders more authority to process, close, service, and liquidate SBA-guaranteed loans. An SBA field office serving the area in which a lender's office is located can nominate the lender, or the lender can ask a field office to consider it for preferred status.

Veteran-owned businesses are one of the fastest-growing and significant segments of the U.S. economy. SBA loans made to veteran-owned small businesses come with reduced fees

CAPLines is an umbrella program that helps small businesses meet their short-term and cyclical working-capital needs. It features four lines: Seasonal CAPLine, Contract CAPLine, Builders CAPLine and Working CAPLine.

Microloan Program

SBA's Microloan Program provides small, short-term loans to small businesses to help with working capital and the purchase of inventory, supplies, furniture, fixtures, machinery or equipment. SBA provides funds to intermediary lenders, specifically designated community-based organizations providing business training and technical assistance to applicants. Certain microloans are also available to qualified not-for-profit child-care centers. Loans can go up to $50,000, but the average microloan is about $13,000.

CDC/504 Loan Program

The CDC/504 Loan Program offers small businesses another avenue for business financing, at the same time promoting business development and job creation. The 504 Loan Program provides approved small applicants with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization.

504 loans are made available through Certified Development Companies (CDCs), SBA's community based partners for providing 504 Loans. Loan proceeds can be used for the purchase of fixed assets such as land and buildings, improvements, and for long-term machinery and equipment. Qualifying businesses must have less than $2.5 million in net income, and other restrictions also apply.

A Certified Development Company (CDC) is a nonprofit corporation set up to contribute to the economic development of its community. CDCs are located nationwide and operate primarily in their state of incorporation (Area of Operation). CDCs work with SBA and private-sector lenders to provide financing to small businesses through the CDC/504 Loan Program, which provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.

Typically, a 504 project includes:

  • A loan secured from a private sector lender with a senior lien covering up to 50 percent of the project cost;
  • A loan secured from a CDC (backed by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost;
  • A contribution from the borrower of at least 10 percent equity.

Disaster Loans

SBA provides low-interest disaster loans to businesses of all sizes, private non-profit organizations, homeowner, and renters. These long-term loans may be for physical or economic damage, home or personal property, or business property. In addition to Fact Sheets for each category of disaster assistance, which delineate loan limits and application procedures, the website also lists current disaster declarations by state.

All SBA loan programs require specific application procedures. These programs offer either online application functions, downloadable forms, or both. Questions typically address credit, financial needs, and corporate information. The SBA likewise provides checklists to help you gather the required documentation.

Grants

The federal government does not offer grants for starting or growing a business. It only provides grants for non-commercial organizations (nonprofits and educational institutions) in medicine, technology development, and related fields.

Some business grants are available through state or local programs. But these grants usually require you to match the funds or combine the grant with other forms of financing, such as a loan.

Surety Bond

SBA offers surety bond guarantees for businesses that meet certain eligibility requirements. All federal construction contracts valued at $150,000 or more require a surety bond during the bid process or as a condition of contract award. Most state and municipal governments as well as private entities have similar mandates, as do service contracts and some supply contracts. Bond applications and other filing documents are available online.

Tax-Exempt Industrial Revenue Bond (IRB)

These state and local government-issued bonds offer longer terms but may incur higher fees than traditional loans. Resembling standard loans, tax-exempt IRBs may be a good option for small manufacturing companies who are creating jobs or otherwise improving economic conditions in a local area.

Sold in the open market or purchased by investors or financial entities, interest income earned by the bond purchaser is exempt from state and local taxes. This allows the lender to pass on savings to the company via lower interest rates. Requirements and application procedures vary by municipality.

Venture Capital

For entrepreneurs who have been unsuccessful in locating financing through traditional methods, venture capital financing may be the solution. This type of equity financing is usually made in exchange for shares in the invested business and an active role in its management.

SBA offers the Small Business Investment Company program, or SBIC, a multi-billion dollar program founded in 1958. While the SBA does not directly invest into small businesses, the SBIC provides funding to qualified investment management firms with expertise in certain sectors or industries. Hence, SBICs are privately owned and managed investment funds. SBA-licensed and regulated, they use their own capital plus funds borrowed with an SBA guarantee.

Federal Government Contracting

Contracting with the Federal government is a great way to help your small business grow – and many programs are available that give preference to small businesses. The SBA is there to help you every step of the way, from certification, to registration, to finding contracting opportunities, and finally, to contract support. This enables you to not only decipher the complex procurement process, but also to prosper from it.

Here are some of the highlights:

The contracting guide has information on: assessing a business, basic requirements, how to win contracts, types of contracts, size standards, governing rules and responsibilities and prime and subcontracting. The contracting assistance programs section has information for women-owned small business federal contracting programs, service-disabled veteran-owned small business programs, 8(a) business development programs, all small mentor-protégé program, HUBZone programs and the natural resource sales assistance program. The counseling and help section has: a commercial market representative directory, contracting area directors and procurement center representative directory.

SBA Learning Center

Since its inception, the SBA Learning Center has provided counseling and training programs for small businesses. In today's global economy, continued education, counseling, and training are not only important for your business' continued economic success, but also necessary to ensure ongoing employee satisfaction.

The Learning Center’s free courses number in the dozens. Ranging from basic accounting and writing business plans to minority businesses and franchising, information is easy to access, clear and individually paced. Tools include podcasts, videos, spread-sheets and calculators to assist small business owners and prospective entrepreneurs. Courses do require registration but include most of the necessary information required to successfully start and run a small business.

For example, under the Starting a Business category, courses include Young Entrepreneurs, Strategic Planning, Buying a Business, Business Development Growth for Native American Businesses, Encore Entrepreneurship for Women, and many more.

The Finance category covers Finding and Attracting Investors, Saving Plans for Small Businesses and How to Prepare a Loan Package, among others. Government Contracting lists more than two dozen courses including Taking Your High-Tech Product to Market, Certificate of Competency, and Market Research – A Guide for Contracting Officers.

Additional video resources are available, too. Like the courses, the videos cover subjects ranging from start-up to management and government contracts to marketing. SBA also hosts an Online Business Chat Room, whereby questions from the small business community are answered monthly by experts.

Local Resources

Closer to home, SBA provides counseling and mentoring to small businesses through a variety of local programs and offices – with direct links posted in the Local Resource section.

SBA District Offices are located across the country. In addition to counseling and mentoring assistance, these offices help implement SBA programs and offer free or low-cost business development support.

SBA also partners with colleges and universities at Small Business Development Centers. These centers are designed to provide management support to eligible small business owners and future entrepreneurs at no cost. Educational services range from assistance with starting a business, to managing a business, to resolving production or operational problems.

Another resource partner of the SBA is SCORE (Service Corps of Retired Executives). This nonprofit resource is comprised of volunteers who offer free and confidential business counseling services to small businesses. With over 300 offices across the country SCORE's resources also include mentoring services, templates and tools, local and online workshops, as well as networking events.

For assistance with government contracting, SBA provides local Procurement Technical Assistance Centers. These centers provide low or nominal cost technical assistance, including counseling and training to small businesses who want to start selling their products or services to the government.

For those small businesses needing help to enter global markets, the SBA provides U.S. Export Assistance Centers. Located in major metropolitan areas, these centers are staffed by experts from SBA, the U.S. Department of Commerce, and the U.S. Export-Import Bank, among others.

Resources for veterans exist through SBA's partnerships with numerous other organizations to provide Veterans Business Outreach Centers. These centers support veterans, especially service-disabled veterans, with entrepreneurial assistance including development of business plans, strategic planning, and follow-up on-site visits.

About 100 Women's Business Centers are located around the country to provide educational assistance to women entrepreneurs, especially those who are economically or socially disadvantaged. Designed to “level the playing field,” these SBA resource centers offer business management, technical training, and counseling to assist women in starting and growing small businesses.