The US Small Business Administration is devoted to helping startups succeed by assisting with funding. Entrepreneurs should be aware of this opportunity and whether or not they are eligible for the loans the SBA provides.
As a result of the tremendous variety of loans offered by the Small Business Administration, the different eligibility requirements are too numerous and too detailed to list here. But there are some broad requirements that most or all potential debtors must meet to receive this type of funding. All businesses must be operated on United States soil, and certain types of industries are forbidden from receiving funding. Gambling, pyramid schemes, investing/speculating, lending or debt securitization, and all illegal activities are forbidden. Additionally, nonprofits and religious organizations do not qualify. Additionally, the SBA generally requires that the potential debtor already be personally invested in the business from a financial perspective-they usually expect a one-fourth contribution of owner's equity.
There are other requirements that vary from loan to loan or industry to industry-the SBA has standards for what size (in terms of employees and revenues) qualifies as a small business. The SBA also has requirements for the proposed use of funds. For example, the 7(a) Term Loan can be used for a great variety of purposes, ranging from supplementing working capital to refinancing other debt. The CDC/504 Term Loan, on the other hand, is used specifically toward heavy asset purchases.
The Small Business Administration's newest loan incarnation is the ARC loan, short for America's Recovery Capital. This type of loan came about in response to the economic crisis, and its eligibility requirements reflect its purpose. Businesses seeking an ARC loan must:
(a) have been profitable or cashflow-positive in the past two years
(b) currently be experiencing difficulty meeting short-term financial needs, and have proof, and
(c) not have any existing SBA loans.
Eligibility details vary from loan to loan and industry to industry.
Growthink recently released a report for entrepreneurs entitled "The Step-by-Step Guide to Raising Capital from Banks and SBA Lenders." For more information on how to get an SBA loan, visit http://www.growthink.com/products/loanguide.
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