Interested in finding Investors? Some SBA Opportunities

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What SBA Offers to Help Small Businesses Grow 

What does SBA offer to small business owners? The programs are many and varied, and the qualifications for each are specific. SBA can help facilitate a loan for you with a third party lender, guarantee a bond, or help you find venture capital. Understanding how SBA works is the first step towards receiving assistance.

What is the SBA’s Role?

“SBA provides a number of financial assistance programs for small businesses that have been specifically designed to meet key financing needs, including debt financing, surety bonds, and equity financing.”

Note that the Guaranteed Loan Program does not directly ‘loan’ money.  Instead the SBA ‘sets the guidelines for loans, which are then made by its partners (lenders, community development organizations, and microlending institutions).”  The SBA does act as a guarantor of loans made through this program.  Your ‘risk’ evaluation in turn considerably lessens.  A condition of qualification is that you have already sought out other options and your own and are rejected for whatever reason.  The qualifications on such loans are subject to changes in government policies. 

(Source:  http://www.sba.gov/content/what-sba-offers-help-small-businesses-grow) 

Guaranteed Loan Programs (Debt Financing)

Bonding Program (Surety Bonds)

SBA’s Surety Bond Guarantee (SBG) Program helps small business contractors who cannot obtain surety bonds through regular commercial channels.

A surety bond is a three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor and a project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed.

Guaranteed Loan Programs

Through the SBG Program, the SBA makes an agreement with a surety guaranteeing that SBA will assume a percentage of loss in the event the contractor should breach the terms of the contract. The SBA's guarantee gives sureties an incentive to provide bonding for eligible contractors, thereby strengthening a contractor's ability to obtain bonding and greater access to contracting opportunities for small businesses. (Source:  Same)

SBS guarantees  “bonds for contracts up to $5 million, covering bid, performance and payment bonds, and in some cases up to $10 million for certain contracts.”  We will make a closer examination by defining terms such as ‘bid’, ‘performance and payment bonds’ in a later post. 

Venture Capital Program

The SBA use the term Small  Business Investment Company or SBIC.  This group provides monies formulated by the difference between ‘growth capitol’  and ‘needs’.  Thus, it may not lend out or arrange ‘lending’ the full amount of your start-up costs but only that amount that cannot be gotten on your own.  If you have no funds for start-up costs and have been rejected from other sources it is not clear to me if they will consider the full amount.  I will look into this in another post.  They do stipulate that they act like the private sector in that they seek ‘hight returns’ on their investment.  They differ in that they “limit their investments to qualified small business concerns as defined by SBA regulations.”  (Source:  Same)

Bonding Program (Surety Bonds)

“SBA’s Surety Bond Guarantee (SBG) Program helps small business contractors who cannot obtain surety bonds through regular commercial channels.”

Surety bonds are “three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor and a project owner.   “ comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract and “assumes the contractor's responsibilities and ensures that the project is completed.”  SBA assumes or guarantees a “percentage of loss in the event the contractor should breach the terms of the contract. “ This guarantee significantly lowers the risk to investor  “in some cases up to $10 million for certain contracts.