Tax, Spend and Help?
Long before President Calvin Coolidge offered his succinct opinion in1924 that "The business of America is business," government at every level theoretically has been offering to help business. That government has not always been successful in this effort is a discussion best left for another time and place. Even so, government agencies -- federal, state and local -- may well be the single largest source of funding available to small businesses. By one estimate there are over 1,100 small business assistance programs run by at least 60 different federal agencies. There are literally billions of dollars available every year, far more than are actually loaned.
Understand that government financing programs for small business are often not totally government funded and controlled. Like the SBICs and MESBICs mentioned in our examination of venture capital, many programs guarantee funding by private sources that otherwise might be reluctant to extend credit without government as a recourse guarantor.
There are many volumes available in any public library listing page after page of government agencies offering monetary help for small business, so you can start there as an information source. A bit of advice: if you find yourself dealing with a federal agency, you might want to visit the local office of your U.S. Senator or Congressional representative, and enlist them in support of your efforts. These legislative offices have staff aides who specialize in assistance to business people. They know that federal bureaucrats jump when a congressional inquiry arrives by mail or phone concerning the status of a constituent's business loan application.
Red Tape Tangle
A century ago, in an age before microfilm and floppy disks, government clerks used to tie bundles of papers to be filed with red cloth string. This is the basis for the term "red tape," meaning to get tangled up or lost in the maze of bureaucracy.
Technology may have changed, but unfortunately government has not. Any government program you approach for financial assistance for your business is going to involve you in forms, applications, information requests, delays and referrals -- sometimes to a maddening degree. This means persistence is a major virtue in dealing with any government program, and that means never taking "no" for an answer. Be courteous, but never be reluctant to go over any civil servant's head to the next level of supervisors, all the way to the top if necessary. Remember, these people are paid by your taxes and they work for you.
The Small Business Administration
This agency has been around for many decades and the SBA is what most people think of when a government business loan is mentioned. The truth is that available SBA loan guarantees and funding are only drops in the bucket when compared with the total number of government programs at all levels. You might want to start your finance inquires close to home at local and state agencies, usually listed in the blue government pages of your telephone directory.
Although the SBA has certain qualifying guidelines that vary with the individual type of business, generally any firm with less than $1 million in annual gross income will be eligible for some help. Some businesses have higher qualifying thresholds, but probably 95 percent of all existing businesses in America qualify for some kind of SBA help.
SBA "Loans"
SBA loans come in two basic types.
1. The SBA can guarantee up to 90 percent of a private loan in amounts up to $500,000 made through a bank or other private lender, once an applicant has been turned down by that lender. By far the vast majority of "SBA loans" you hear about are of this type -- government loan guarantees, not direct loans.
2. Very rarely, the SBA will make direct government loans to small business, usually in amounts of $15,000 or less, but there are all sorts of requirements that must be met. These loans tend to be specialized: disaster relief, energy conservation, pollution control, businesses displaced by government actions like military contract cancellations and base closings, veterans loans. If you think you might qualify, go after it.
In addition to the usual factors any lender looks at when making a decision about a requested loan, SBA (and other government agencies) have a strong interest in job creation and retention -- the greater number of jobs you can show to be involved in your request, the better for your loan prospects.
The drawbacks associated with SBA loans and guarantees are the mountains of paperwork and the time delays. There are also all kinds of policy restrictions on how you manage your business once you get the money, since government money always comes with strings attached.
How To Find The SBA
There are SBA offices all over the country, so check the phone book. Or you can call (800) U ASK SBA, or write to: U.S. Small Business Administration1441 L Street NW Washington, D.C. 20416
Phones: (800) 368-5855 or (202) 653-6570.
Farm Loans
Businessmen or prospective business owners who are unable to get an SBA loan often do not realize that there are other federal agencies which make business loans.
The Farmers Home Administration has a program of business and industrial loans for projects located in towns of under 50,000 population; although preference is given to those in towns of under 25,000 population, rural communities, and open country.
Still More Federal Money
The Economic Development Administration has a program of loans in areas which have been designated as economically depressed, and this actually covers a very large percentage of the country. Preference goes to firms which will have an effect on increasing employment in the area, and these loans may be combined with SBA loans. The interest rates are very low. Full information may be obtained from the Economic Development Administration, Washington, D.C. 20230.
Think Local
In your search for cash, don't forget there are many other federal loan agencies, and state and local agencies. State agencies also offer tax breaks and incentives, industrial development bonds, even direct grants if you meet their qualifications.