Read Start Your Own Business Online

Authors: Inc The Staff of Entrepreneur Media

Start Your Own Business (36 page)

BOOK: Start Your Own Business
5.13Mb size Format: txt, pdf, ePub
ads
Each of the five credit lines has a maturity of up to five years but can be tailored to the borrower’s needs.
Pre-Qualification Program
 
The SBA’s Pre-Qualification Loan Program helps pre-qualify borrowers in underserved markets, including women business owners. Under the program, entrepreneurs can apply for loans and get up to $250,000. With the aid of private intermediary organizations chosen by the SBA, eligible entrepreneurs prepare a business plan and complete a loan application. The intermediary submits the application to the SBA.
 
AHA!
 
Check out the SBA’s Women’s Business Center, a website for women who want to start or expand their businesses. There are free online courses and a world of information about marketing, government contracting, technology training, international trade and SBA services, plus success stories to inspire you. Visit the site at onlinewbc.gov.
If the application is approved, the SBA issues you a pre-qualification letter, which you can then take, along with your loan package, to a commercial bank. With the SBA’s guarantee attached, the bank is more likely to approve the loan.
MicroLoan Program
 
SBA financing isn’t limited to the 7(a) group of loans. The MicroLoan Program helps entrepreneurs get very small loans, up to $35,000. The loans can be used for machinery and equipment, furniture and fixtures, inventory, supplies, and working capital, but they cannot be used to pay existing debts or to purchase real estate. This program is unique because it assists borrowers who generally do not meet traditional lenders’ credit standards.
MicroLoans are administered through nonprofit intermediaries. These organizations receive loans from the SBA and then turn around and make loans to entrepreneurs. Small businesses applying for MicroLoan financing may be required to complete some businessskills training before a loan application is considered.
The maximum term for MicroLoans is six years, and the interest rates vary.
CDC/504 Loan Program
 
On the opposite end of the loan size spectrum is the 504 Loan, which provides long-term, fixed-rate loans for financing fixed assets, usually real estate and equipment. Loans are most often used for growth and expansion.
 
AHA!
 
Looking into exporting? Look into the U.S. Export Assistance Centers. These one-stop shops combine the trade promotion and export finance resources of the SBA, the U.S. Department of Commerce and the Export-Import Bank. Locate a center at
export.gov/eac/index.asp
.
504 Loans are made through Certified Development Companies (CDCs)—nonprofit intermediaries that work with the SBA, banks and businesses looking for financing. There are CDCs throughout the country, each covering an assigned region.
If you are seeking funds up to $1.5 million to buy or renovate a building or put in some major equipment, consider bringing your business plan and financial statements to a CDC. Typical percentages for this type of package are 50 percent financed by the bank, 40 percent by the CDC and 10 percent by the business.
In exchange for this below-market, fixed-rate financing, the SBA expects the small business to create or retain jobs or to meet certain public policy goals. Businesses that meet these public policy goals are those whose expansion will contribute to a business district revitalization, such as an empowerment zone; a minority-owned business; an export or manufacturing company; or a company whose expansion will contribute to rural development.
Empowerment Zones/Renewal Communities
 
Since 1980, 40 states have established programs to designate enterprise zones, offering tax breaks and other incentives to businesses that locate in certain economically disadvantaged areas. States vary widely in the number of zones designated, incentives offered and success of the programs. In some areas, businesses may also qualify for lower utility rates or low-interest financing from eligible government jurisdictions. To be eligible for any of these incentives, businesses must generally meet certain criteria, such as creating new jobs in a community.
“Customers aren’t just
buying our software,
they’re buying a
relationship.”
—KATRINA GARNETT,
FOUNDER OF CROSSROADS
SOFTWARE INC.
 
 
The Empowerment Zone/Renewal Communities initiative was set up to provide tax incentives and stimulate community investment and development. Specified urban and rural communities will receive grants and tax breaks for businesses in the area. The federal government’s involvement means entrepreneurs in those areas can get federal tax breaks, not just state.
If you choose to locate in an enterprise or empowerment zone, look beyond the tax breaks to consider long-term concerns such as availability of a work force and accessibility of your target market. Make sure the zone offers other support services, such as streamlined licensing and permitting procedures. Most zones that succeed have high development potential to begin with, with good highway access, a solid infrastructure and a trainable labor force.
For more information on enterprise zones, contact your state’s economic development department or call HUD’s Office of Community Renewal at (202) 708-6339.
8(a) Business Development Program
 
The SBA’s 8(a) program is a small-business set-aside program that allows certified socially and economically disadvantaged companies to enter the federal procurement market as well as the economic mainstream. The 8(a) program is envisioned as a starter program for minority businesses, which must leave the program after nine years.
INFORMATION, PLEASE
 
D
ealing with the federal government has gotten easier, thanks to the U.S. Business Advisor, an online clearinghouse for small business. Instead of contacting dozens of agencies and departments for information on laws and regulations, you can use this one-stop shop to find information on business development, taxes and laws, a variety of workplace concerns as well as government procurement loans. You can find the U.S. Business Advisor at
business.gov
.
 
Entrepreneurs who participate in the 8(a) program are eligible for the 7(a) Guaranty Loan and the Pre-Qualification Programs. Businesses must be owned by a socially and economically disadvantaged individual. Socially disadvantaged categories include race and ethnicity. To qualify as economically disadvantaged, the person must have a net worth of less than $250,000 as well as two years’ worth of tax returns.
Export Working Capital Program
 
If you are planning to export, you should investigate the Export Working Capital Program. This allows a 90 percent guarantee on loans up to $2 million. Loan maturity is one year, and funds can be used for transaction financing. The exports financed must be shipped and titled from the United States.
Special Purpose Loans
 
If you believe you have a special case that requires extra help, you may be in luck. Of course, keep in mind that everybody believes they deserve extra help with financing, but in many situations, the SBA has a loan program tailor-made for your situation. If you’re starting a business, for instance, that pollutes the environment, but you plan to spend additional money to reduce the toxins you’re putting into the air, soil or water, you may be eligible for a Pollution Control Loan, which is basically a 7(a) loan earmarked for businesses that are planning, designing or installing a pollution control facility. The facility must prevent, reduce, abate or control any form of pollution, including recycling.
 
AHA!
 
Buying a franchise? Many municipalities and states have financing programs that can underwrite the cost of a franchise. Be aware, however, that the focus of these programs is job creation. To find programs in your area, call the nearest Small Business Development Center or economic development program. It takes a bit of investigating to find the programs, but the results could be well worth the effort.
If your business plans to be active in international trade or your top competition is cheap imports, the International Trade (IT) Loan Program is something you should look into. The SBA can guarantee up to $1.75 million for fixed-asset financing (facilities and equipment) or refinancing of an existing loan for the same purposes. Working capital cannot be a part of an IT loan.
Numerous variations of the SBA’s basic loan programs are made available to support special needs. So if you believe your business might fall into a category in which the SBA can funnel additional loans to you, it’s definitely an avenue worth checking out.
Making the Most of the SBA
 
The SBA is more than a source of financing. It can help with many aspects of business startup and growth. The SBA is an excellent place to “get your ducks in a row” before seeking financing. SBA services include free resources to help you with such tasks as writing a business plan and improving your presentation skills—all of which boost your chances of getting a loan.
For more information on other SBA programs, visit the SBA’s website at
sba.gov
, call the SBA’s Answer Desk at (800) U-ASK-SBA, or contact your local SBA district office by visiting
sba.gov/localresources/index.html
. Your SBA district office can mail you a startup booklet and a list of lenders, and inform you about specialized loans tailored to your industry and where to go for help with your business plan or putting together financial statements.
Granting Wishes
 
When most people think of grants, they think of money given free to nonprofit organizations. But for-profit companies, and frequently startups, can also win grant money. But how do you find these grants? Unfortunately, locating the right grant is a little like looking for your soulmate. The grant is out there, but you’re going to have to do a lot of looking to find a good match. A good place to start is at your local bookstore. There are a lot of books about getting grants, with titles like
Grant Writing for Dummies
(Wiley) by Beverly A. Browning,
Grantseeker’s Toolkit
(Wiley) by Cheryl Carter New and James Quick, and
Demystifying Grantseeking
(Wiley) by Larissa Golden Brown and Martin John Brown. And then there’s the Bible of grant books—the annual
The Grants
BOOK: Start Your Own Business
5.13Mb size Format: txt, pdf, ePub
ads

Other books

Angel Eyes by Shannon Dittemore
I've Got You Under My Skin by Mary Higgins Clark
Summerset Abbey by T. J. Brown
Master of Two: Nascent Love by Derek, Verity Ant
Akasha 4 - Earth by Terra Harmony
Florida Knight by Bancroft, Blair