Raj Nisankarao, President
National Business Association (NBA)
You, like most small business owners know that access to capital is crucial for running your small business. A few popular methods you may have used to access capital are:
- Borrowing from a reserve cash account
- Maximizing cash flow
- Short term debt on credit card
- Accounts Receivable Discounting
- Applying for a bank loan
These methods have helped you make for example, the next payroll or to take advantage of an opportunity that required quick cash. If funds were needed for immediate items such as payroll, where access to funds is crucial, you borrowed from the reserve cash account. For all other needs, you used your line of credit with your bank.
Now let’s say a once in a lifetime opportunity that could possibly triple your investment in the next 6 months is knocking on your door. You have exhausted all your options and can not secure funds to close the deal. What now? Is the U.S. Small Business Administration (SBA) an option for the loan? How does this work?
According to the SBA website, it helps small businesses through 3 major categories. It "dedicates its energy and resources to providing support to small businesses and small-business owners across the nation.
SBA helps businesses across the country through what we call the "3 C’s" of our service:
- Capital: We work with about 5,000 banks to provide SBA loans to deserving small businesses.
- Contracts: We work to ensure that 23% of federal contract dollars go to small businesses.
- Counseling: 14,000 SBA-affiliated counselors are ready when you need small business guidance."
Most banks that work with SBA guaranteed loan programs will discuss your options to get a guarantee from the SBA. You can always go to the SBA website to find a lender by your zip code. The SBA does not actually give you the loan; it stands behind you for up to a certain percentage of the loan amount you requested from the financial institution. There are several SBA loan programs–for details go online to their website at www.sba.gov. Lest we forget, you still need to prove yourself to the SBA that you are worth the risk. Since your risk to the bank is being shared with the SBA, chances for being approved by the bank increase in your favor.
Loan officers typically do not have the time and resources to help you through the entire loan guarantee process. You can start with simple software such as the First Step Review to determine your likelihood of qualifying for a small business loan . First Step Review software is offered by the National Business Association to its members and the general public at no cost. You can also go online to the Small Business Administration (www.sba.gov), SCORE (www.score.org) or a Small Business Development Center (www.asbdc-us.org) to talk to a counselor. Counseling is usually offered at no cost but occasionally there is a nominal fee for incidentals.
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