Federal Small Business Loans and How They Can Help You

While large banks in particular are still keeping a tight grip on their money, federal small business loans continue to go out to keep small businesses opening up and growing. One example is Michigan, where federal loans have almost tripled since 2009.

This commitment to small businesses by providing federal loans is nothing new. According to Small Business Grants.com, the US government is the largest provider of financial assistance to small business. Small Business Grants.com says that many of today’s household corporate names, like Ben & Jerry’s and Intel, started with small business loans from the federal govenrment.

So how can federal loans help your business? For one thing, these loans are guaranteed loans. And for another, in at least some kind of federal loan the bank, originating the loan, can’t charge your small business loan application fees or “points,” and they can’t sell you a loan with balloon payments. This makes small business loans issues by the federal government less expensive to you than you’ll find at many banks.

There is also a wide variety of small business loans available:

• The 7(a) Business Loan Guarantee Program is the primary kind of federal loan offered by the Small Business Administration (SBA). These small business loans are guaranteed by the government, which doesn’t allow the originating banks to charge application fees, “points,” or to issue the loans with balloon payments. These loans can be used for a wide variety of purposes, from expanding or renovating your facilities to refinancing your existing debt.

• The SBA Women, Minority, Veterans, Small Business Loan Prequalification Program offers federal loans to business owners who fall into the above-referenced categories as well as rural small business owners and some others in need of federal loans. With this program, you can pre-qualify for your federally-guaranteed 7(a)small business loan before you go to the bank.

• The SBA works with about 270 Certified Development Company Programs to provide long-term, fixed-rate loans for major fixed assets. While the CDC’s don’t offer federal loans, they work with the SBA and other lenders to provide small business loans and other loans for these purposes.

• SBA Express Loans are small business loans of $250,000 or less with an approximate 36-hour waiting time from the time you submit your application.

• The 7(m) Microloan Program offers federal loans of up to $35,000.

• CAPLines are federal loans through the Small Business Administration that help small businesses meet short-term and cyclical capital needs.

• If yours is an export business, the SBA even offers ExportExpress Loans, small business loans that can be used for most export-related purposes.

• Don’t forget grants! In addition to the many federal loans available to small businesses, the federal government also helps small businesses with grants – free money.

If you’ve been worried that the current credit crunch will get in the way of your business dreams, remember that the federal government offers several different small business loans to get you up and running and keep you there. Federal small business loans are available to help you start up, finance cyclical expenses, and to help in case of emergency. And because these small business loans are guaranteed with taxpayer dollars, banks are more likely to be interested in servicing these forms of loans. Together with grants, small community banks and family and friends, federal small business loans are among the best sources of start-up and operating capital for your small business. Before going to a large bank, check with the SBA to see if they are right for you.