Government Business Loans

Government Business Loans!

This year, nearly $11,500,000,000 ($11.5 billion) in long-term government business loans and other financial assistance will be provided to more than 67,000 small businesses through the Small Business Administration's network of participating banks, small business lenders, certified development companies, and SBA-licensed companies.

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Government Business Loans

In order to promote access to government business loans, the U.S. Government's Small Business Administration (SBA) provides small business loan guarantees to participating small business lenders under a variety of government business loan programs.

The U.S. Small Business Administration provides government business loans, through thousands of financial intermediaries, to small business owners unable to obtain small business loans to start-up or expand their small businesses.

Traditionally, small businesses have faced serious problems obtaining long-term small business loans in the private business loan marketplace. The Federal Government's Small Business Administration has taken substantial steps in the last 2 years to ensure that its government business loan guarantee programs help the maximum number of small businesses at minimum cost.

1. Low Documentation (LowDoc) Loan Program. The paperwork and red tape associated with government-guaranteed loans used to be an embarrassment. Today the LowDoc program features an easy, one-page SBA application and a rapid response, usually within 2 or 3 days, for small business loans up to $100,000.

In 1993, the year before LowDoc was implemented, 30% of SBA's guaranteed small business loans were under $100,000. As of this year, the percentage of SBA's guaranteed small business loans is 63%.

The Small Business Administration's 7(a) small business loan program has grown from 27,000 small business loans ($5.9 billion) in 1998 to 56,000 small business loans ($7.8 billion) for year 1999. Reports show that small business loans made under this government business loan program are performing at a better rate than those made during the same period under the regular 7(a) government business loan program.

2. The FA$TRAK Program. On February 27 of 1995, SBA launched a government business loan program called FA$TRAK that permits selected lenders to approve and service small business loans up to $100,000, while using their own forms, documentation and procedures.

3. 504 Business Development Program. SBA's 504 program, which provides asset-based financing for growing small businesses, historically has required cumbersome, resource-intensive review procedures. The new SBA has embarked upon a complete streamlining of the 504 process from authorization to closing.

4. Women's Pre-Qualification. The Women's Pre-Qualification Loan Program was launched in June 1994 to help increase the number of government business loans made to women business owners by assisting them to pre-qualify for SBA guarantees. The program simplifies the business loan process for women business owners and makes it more user-friendly.

Selected nonprofit loan packagers pre-screen and present business loan requests from women owned small businesses to SBA. If SBA finds the borrower qualified, it issues a pre-qualification letter which the loan applicant can take to a commercial lender. At the time the pilot was launched, women, who own about 38% of all small businesses, were receiving about 14% of SBA loan guarantees. A year later, the percentages were 24%.

5. Export Working Capital Program. In October 1994, the SBA reorganized its trade loan effort as the Export Working Capital Program (EWCP) to help small businesses obtain export financing. In conjunction with the Export-Import Bank, SBA's EWCP offers streamlined business loan application procedures, a simplified business loan application, a higher guarantee and two kinds of small business loans, both well-suited for export financing.

6. Small Business Investment Companies. The Small Business Investment Company (SBIC) program is a unique partnership of public and private funds, in which SBA supplements the capital of private venture capital firms. During the past two years, SBA has worked with the private venture capital industry. In 1994, the SBIC program attracted more private capital ($520 million) than in the previous 10 years combined.

7. CAPlines. All of SBA's short-term and revolving lines of credit operate under the CAPlines umbrella. Under the various CAPlines components, the SBA provides financing for asset-based, seasonal, contract and builders' lines of credit. Recently, the SBA took steps to make its asset-based lending program more customer-friendly by introducing a new, less complicated, and less costly program to handle asset-based revolving lines of credit in amounts up to $200,000.

Online Small Business Loan Forms.

SBA allows lenders participating in the business and development company loan programs to utilize online copies of SBA business loan applications and closing forms in making SBA guaranteed loans. With advances in technology, SBA recognizes that its forms may be reproduced as exact copies by online. The use of these online business loan applications may in many cases help expedite the processing of SBA guaranteed small business loans.

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