In today’s question and answer session we discussed whether or not it is a good idea to get SBA loans for your new company. Hopefully by the end of the reading you should have a clear understanding of the implications of funding your business in this way and know if you may be a good fit for the program.
I am starting a new business soon and I need to get more funding to pay to start my company. I’ve heard about SBA loans and was wondering if you think they might be a good fit. Thanks.
Thanks for your question. If we take a step back and look at your problem there are a few ways in which you can fund your new company. First, you can try to get investment capital of some kind. This would entail taking on partners, bringing in family as investors, or looking for venture capital. These are all very good options for some, but keep in mind there are always tradeoffs. In this case the tradeoff is ownership. When you bring in partners, or venture capital, you are offering a piece of your company in exchange. This can be a great option for some, as you don’t have to worry about loan payments when you first start your company and money is very tight.
Alternatively you can borrow money. You can attempt to get money from banks, or from specialty niche lenders in your field, but this can be very difficult or expensive for new business owners. One option to help you get the funding you need more easily is to coordinate with the small business administration to get SBA loans.
This loan program is coordinated by the small business administration, but it is not funded by it. Instead, you will be using them to consult you on how to setup your business and how to get funding. Two services they offer are to help you setup a formal business plan, and the other is to help you get approved for a loan. They have consultants who can sit down with you to go over your business plan as well helping you add new information to it that you perhaps have not considered. By having a formal plan in place and understanding the terms and conditions of the loans approved by the small business administration, you should hopefully be able to get the funding you need. They can also help you understand the requirements of the loans you are seeking and help get you in touch with lenders most likely to fund a new venture of the type you are starting.
If you have more questions on this topic I recommend you reach out to your local SBA branch and ask to have someone look over your existing business plan and consult you on making the necessary improvements, for profitability and also to qualify for funding.