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SBA’s Role in Providing Financial Assistance to Small Businesses

LongIsland.com

The U.S. Small Business Administration (SBA) is charged with providing four primary areas of assistance to small business. The four areas are Advocacy, Management, Procurement, and Financial Assistance. Financial Assistance is delivered primarily thr

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The U.S. Small Business Administration (SBA) is charged with providing four primary areas of assistance to small business. The four areas are Advocacy, Management, Procurement, and Financial Assistance. Financial Assistance is delivered primarily through SBA's Investment programs, Business Loan Programs, Disaster Loan Programs, and Bonding for Contractors.



SBA's Business Loan Programs



The SBA administers three separate, but equally important loan programs. SBA sets the guidelines for the loans while SBA's partners (Lenders, Community Development Organizations, and Microlending Institutions) make the loans to small businesses. SBA backs those loans with a guaranty that will eliminate some of the risk to the lending partners. The Agency's Loan guaranty requirements and practices can change however as the Government alters its fiscal policy and priorities to meet current economic conditions. Therefore, past policy cannot always be relied upon when seeking assistance in today's market.


Federal appropriations are available to the SBA to provide guarantees on loans structured under the Agency's requirements. With a loan guaranty, the actual funds are provided by independent lenders who receive the full faith and credit backing of the Federal Government on a portion of the loan they make to small business.


The loan guaranty which SBA provides transfers the risk of borrower non-payment, up to the amount of the guaranty, from the lender to SBA. Therefore, when a business applies for an SBA Loan, they are actually applying for a commercial loan, structured according to SBA requirements, which receives an SBA guaranty.


In a variation of this concept, community development organizations can get the Government's full backing on their loan to finance a portion of the overall financing needs of an applicant small business.



SBA's Investment Programs

In 1958 Congress created The Small Business Investment Company (SBIC) program. SBICs, licensed by the Small Business Administration, are privately owned and managed investment firms. They are participants in a vital partnership between government and the private sector economy. SBICs provide venture capital to small independent businesses, both new and those already established, with their own capital and with funds borrowed at favorable rates through the Federal Government.
All SBICs are profit-motivated businesses. A major incentive for SBICs to invest in small businesses is the chance to share in the success of the small business if it grows and prospers.


For additional information visit the SBA Web site and related links listed below.