How to Apply for Government Small-Business Loans & Subsidies
The most popular and frequently used government programs for acquiring small-business loans are offered through the Small Business Administration (SBA). The SBA doesn't directly lend money to applicants. Rather, it guarantees loans made by private lenders. Programs are available for both startup and established businesses. The process of securing a government-backed loan is virtually the same as obtaining a non-government-guaranteed business loan. You must apply with a participating bank or other lending institution. Banks agree to structure your loan according to SBA requirements, then apply for and receive an SBA loan guarantee. The 7(a) is the SBA's primary small-business loan program.
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Things You'll Need
- Business plan
- Collateral or equity
- Personal and financial documentation
- Licenses, certificates and permits
- Bank fees
Instructions
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Acquire copies of your personal and business credit reports (if your business isn't a startup). Knowing your credit history is essential before applying for a loan of any type.
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Apply at a lending institution for a small-business loan. You must be denied a traditional small-business loan before applying for assistance from the SBA. By law, the SBA cannot guarantee a loan if you can obtain financing through private means. If you've never applied for a business loan, you may be surprised and get approved for a non-government-guaranteed loan.
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Research the different SBA loan options available. There are various short- and long-term programs available for meeting your needs, such as working capital, machinery and equipment, furniture, land and property issues, leasing matters, renovation and debt refinancing. Most small-business options fall under the auspices of the 7(a) program.
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Meet with a bank representative or agent of another lending institution to discuss an SBA-backed loan. The process and requirements will be nearly identical to a non-SBA loan. You'll need to provide various documentation, including a business plan (for new businesses) or business history report, business statements (current and the past three years), business projections, personal financial statements (for you, each partner and any stockholder with 20 percent or more ownership), collateral data (home and business equity, cash on hand, ability to borrow) and resumes and information about management personnel. Tax returns, business licenses and permits, and lease information also will be needed.
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Come to a decision, with the bank agent, about the type of loan for which you want to apply. There are express loans, export loans, short- and long-term loans, rural programs and "micro-loan" programs for small businesses, startups and minor expansion needs. Get terms in writing. Calculate your payment obligations both short- and long term and make sure the loan provisions are acceptable and feasible.
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Complete the application, SBA Form 4. Although you can pick up an application from a lender and complete it at home, fill it out with the lending agent, if possible. She can help you with any questions, and the two of you can review a checklist of required documents and supporting material you'll need to include when filing the application with the SBA.
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Tips & Warnings
Make sure all business financial statements, such as your balance sheet, are current.
After being turned down by a commercial lender and before applying for an SBA loan, try to re-establish your personal and credit histories, if that was a factor in your original loan denial.
References
Resources
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