How to Get a Business Loan From the Government

Government loans help start and maintain small businesses.

Small businesses are an essential part of the fabric of any economy. Growing this particular sector is important to the government, so there are a variety of business loan products available. Often, the idea for the business comes at a time when funds are low. Job loss, graduation from college or beginning a new career motivates entrepreneurs to start businesses. That's why government loans are so important. Usually available at a lower interest rate and better terms than private business loans, government loans help dreams come true for those wishing to start or maintain their own businesses.

Instructions

1. Visit your local bank and ask about SBA loans. SBA loans come from the US Small Business Administration. These loans come through financial institutions, community development organizations or micro-lending institutions and are guaranteed by the SBA. This means the SBA guarantees to the lending institution that the loan will be repaid which reduces the risk to the lender. When a borrower uses an SBA loan it is structured under strict SBA guidelines with an SBA guaranty.

2. Discuss with your lender what type of SBA program is best for your particular situation. SBA helps in the areas of guaranteed loans, surety bonds and venture capital. The three-way agreement in the surety bond program guarantees the party funding a project that the funds will be repaid even if the contractor is unable to fulfill his or her side of the agreement. The venture capital program provides small businesses loans through privately owned investment funds. These funds are managed by the SBA.

3. Determine, with the help of your lender, which application format is right for you. There are many different aspects to preparing a loan package for an SBA government business loan. Whichever method you and your lender choose, the essential parts of the loan package remain consistent. A quality loan proposal needs a cover letter, an executive summary. This includes a clear picture of your business, its history, clients, number of employees, budget and annual sales. You will also need, among other documents, a loan amount request and personal and business financial statements.

4. Fill out any additional forms needed by your financial institution. Each lender has its own requirements when applying for business funding along with the SBA requirements. These may include: purchase agreements, references and copies of business licenses.

Tips & Warnings

• Consider using a lender or financial institution where you already have an established relationship. This will expedite the process since much of the documentation needed for a government business loan is readily available.

References

• U.S Small Business Administration: For Borrowers