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Ask SCORE: Does your business need funding? Try the SBA

Starting a small business takes time, hard work and money. Depending on your type of business and your financial situation, you may find you need to reach out to outside sources for funding.

One resource you can turn to for assistance in obtaining a loan to start or grow your business is the U.S. Small Business Administration.

While the SBA does not directly lend money to small businesses, it can facilitate loans with third-party lenders.

Various banks, credit unions, community development organizations and microlending institutions across the country partner with the SBA to provide funding to small businesses that don’t have access to other financing options with reasonable terms.

The SBA sets specific guidelines for loans made by its partners, and it guarantees that they’ll be repaid by the borrowers. This benefits small-business owners by giving them access to much-needed funding, and it eliminates some of the risk to the lending partners.

To qualify for an SBA loan, your business must meet certain criteria regarding business size, financial standing and other factors. You also must meet the credit qualifications of the lender.

Advantages of SBA loans over conventional loans include lower down payments and longer repayment terms.

Two SBA loan programs that benefit many small businesses are:

7(a) loan program

These loans can be used for various purposes, such as satisfying short-term or long-term working capital needs; purchasing equipment, machinery and supplies; buying real estate; and refinancing existing debt.

Microloan program

This program provides loans up to $50,000 to help businesses with lower-dollar financing needs. According to the SBA, the average microloan is approximately $13,000. You may not use microloans to pay existing debt, but you can use them for working capital and purchasing inventory, supplies, furniture, equipment, machinery, etc.

There are other SBA loan programs, as well. For information about them, visit the SBA website’s Loan Programs page. You also can find more details about obtaining financing for both startups and existing small businesses on the SBA website’s Borrowing Money For Your Business page.

If you want to explore more potential sources of financing for your business, check out the SBA’s Loans and Grants website page. And consider reaching out to your local SCORE chapter to speak with a mentor who can direct you to lending institutions and organizations in your community. They also can help guide you as you prepare to approach lenders for funding.


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