If you are individual, who has an entrepreneurial spirit, you can easily get a loan offered by the federal government. This loan allows you to start a small business. The department of Small Business Administration (SBA) acts as a guarantor for these loans. These loans are provided by banks or financial institutions. Very rarely, the SBA provides the loan directly.
Along with the SBA, certain other government agencies provide financing to small businesses through loans and grants. To avail of this loan, you have to submit the business plan that you have chalked out along with your abilities to indicate that you can handle the business properly. Your credit score should be high to get the loan. The lending authorities check your credit ratings before approving your loan.
The SBA has various types of small business loans. The Basic Loan Guaranty program is designed for those small businesses who will not get the loans from the lenders. These loans are disbursed by the commercial lenders with SBA acting as a guarantor. The Certified Development Company (CDC) Loan Program is ideal if you want to buy a property or machinery to expand or modernize your existing operations. This is a long-term loan with a fixed-rate of interest. You need to contribute 10% of the amount as equity. The micro loan program is a short-term loan with limit not more than $35,000. You can use it as a source of funding for working capital and inventory or non-profit childcare centers. However, you cannot use it to clear your existing dues. The loan prequalification program allows you to get your application reviewed and approved by the SBA before going to lenders. The limit for this program is $250,000.
Government small business loans are meant to develop entrepreneurial spirit and can be an ideal source of funds if you want to start your own enterprise.