There are many things to consider when running a small business or company. One of the major aspects is figuring out financing. There are many different avenues you can go down, as far as deciding upon where to get the financial aid, and in what form you receive it. The specific type that I will be talking about today is called a SBA loan.
A SBA loan is given out by the Small Business Administration. This administration is a government run agency, specializing in the area of helping small businesses. The agency does this by providing programs and financial options to those running small companies. Its main purpose is to help the growth and expansion of small business. Although they do not directly hand out loans, they are able to guarantee them through private sector lenders and financial institutions, such as banks.
Situations in which a SBA loan is most often granted, is when a small business is trying to expand, and needs to make purchases, such as more machinery and equipment, or hire on new employees or workers. Basically, this type of loan is given to those whose small business may have experienced a sudden rise in the demand for whatever product or service it is that they provide, and they now need to make expansions in order to keep up with the growing demand. Depending upon the specific circumstance in which you need financial backing, there are a variety of options available to you, tailored to fit your specific needs. Going to your local bank for a loan is an option for those who have built up a business credit history. This applies generally to those who have been in the world of business for a while, and not to those who are in the beginning processes of starting up.
The SBA works as a gate keeper between major banks and small businesses. Many major banks would not lend money to small companies as there is greater risk and the reward is not as great. This is becoming truer in recent years as banks have consolidated into fewer and fewer entities. By offering assistance such as a loan guarantee program the small business ministration has offered an incentive to large banks to continue to lend money to small companies. By doing so they help to strengthen America by offering a diversity of companies and products and also supplying jobs throughout the country.