In this article concerning Business Loan Packaging, rather than discuss any of the specific components of the package, I will focus on one of the helpful resources organization wise that offers a vehicle for receiving business financing that’s effective and purposeful.
The SBA (or “Small Business Administration”) is a federally regulated organization that specializes in offering both technical and financial assistance to small business owners as categorized by gross annual sales in addition to total number of employees. Created by the Eisenhower administration in 1953 by the Small Business Act, the mission of the SBA is to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters. OK, upon reading the mission statement, you may come away thinking how lofty a vision it is, but let’s see how the SBA takes steps to make this vision a reality.
The organization is divided into two distinct parts: technical and financial assistance. Technical assistance includes those initiatives such as business development centers / programs and entrepreneurial development programs. The focus of the technical assistance centers is to provide a platform for business owners to receive ongoing qualitative and affordable business educational assistance. Business doesn’t exist in a vacuum whether viewed from the customer or the owner(s). Supportive educational and other training services are always needed to ensure entrepreneurs stay sharp and current of relevant characteristics that impact their operations.
The financial assistance part of the SBA focuses on making the financing component of a business obtainable and effective. The organization is known largely for its loan guarantee programs such as the 7(a) and 504. The basics of these programs is that “participating” lenders such as banks, credit unions, community development organizations, etc. generate business loans that include a marginal (small) portion of the “participating” lenders money at risk with the remaining portion of the business loan covered by an SBA loan guarantee. In other words, in the event of default, the lending source will only lose the portion of the business loan that was not covered by the SBA. Makes sense, right? Although there’s a loan guarantee for the lending source, it still should not minimize any aspect of the business credit analysis.