The U.S. Small Business Administration (SBA) was originally founded in 1953 as an independent agency of the federal government to Aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of the United States. Although the SBA has grown and evolved in the years since it was established in 1953, its bottom line mission remains the same. The purpose of the SBA is to help Americans start, build and grow businesses. Through an extensive network of field offices and partnerships with public and private organizations, the SBA delivers its services to people throughout the United States, Puerto Rico, the U. S. Virgin Islands and Guam. The SBA is an independent agency within the federal government that operates under the authority of the Small Business Act of 1953. The SBA can makes loans directly to businesses and acts as a on bank loans. In some circumstances it also makes loans to victims of natural disasters, works to get government contracts for small businesses, and assists businesses with management, technical and training programs, some of which can be done on-line. The SBA has directly or indirectly helped nearly 20 million businesses and currently holds a portfolio of roughly 219,000 loans worth more than $45 billion making it the largest single financial backer of businesses in the United States. The SBA has survived a number of threats to its existence. In 1996, the then newly Republican-controlled House of Representatives planned to eliminate the agency. It survived and went on to receive a record high budget in 2000. Renewed efforts by the Bush Administration to end the SBA loan program have met congressional resistance, although the SBA's budget has been repeatedly cut, and in 2004 certain expenditures were frozen. SBA Loan Programs The most visible elements of the administration are the loan programs it administers. The SBA itself does not grant loans. Instead, the SBA guarantees against default certain portions of business loans made by banks and other lenders that conform to its guidelines. Contrary to popular belief, these programs are not generally for persons with bad credit who can not get bank loans, nor are they primarily used for startup funding. The primary use of SBA programs are to make loans for longer repayment periods and with looser affordability requirements than normal commercial business loans. Also, a business can qualify for the loan even if the yearly payment would be the same as the previous year's profit, whereas most banks would want payment for a loan to be no more than two-thirds (2/3) of the prior year's profits for a business. The lower payments, longer terms and looser affordability calculations allow some businesses to borrow more money than they could otherwise. One of the most popular uses of SBA loans is for commercial mortgages on buildings occupied by a small business. These programs are chosen because most bank programs, while having similar payments and rates, require borrowers to refinance every five years. How Can I Benefit From The SBA? The Small Business Administration (SBA) has created a program of government-guaranteed loans designed to help give small businesses that may not otherwise qualify for credit get the funds they need. SBA loans make it possible to qualify businesses more easily and provide them with more flexible terms than conventional loan options, letting you preserve working capital for other expenses. Qualifying for an SBA loan is easier than qualifying for other loans. First, the SBA allows higher loan-to-value ratios. Depending on your loan request, you may be able to borrow up to 90 or more, not meaningfully worse than banks. The SBA is also one of very few agencies that pays its own way and does not drain the treasury for its loan programs. Price Waterhouse affirmed, some years ago, that the tax revenue generated by only a handful of SBA startup loans more than paid all the operating expenses for the Agency. One of the primary uses of SBA funding is for business owners to get a loan to buy the property their business occupies. Owning the property and having the business rent the property from the owner is a form of a tax shelter, so the SBA has been criticized for aiding tax shelters. Of course, legally taking advantage of tax law provisions is completely ethical. Various banks are often criticized for offering or writing fewer SBA loans proportionally than other banks, which critics see as a sign of discrimination. However, others counter that SBA loans are equivalent to or many times worse than what the banks offer themselves, so a customer of that bank might choose the normal bank product more often than their SBA product. Overall, the SBA creates a vast avenue of opportunity for companies looking for a relatively cheap source of capital. For more information on the SBA and other excellent ways to secure a small business loan, visit our website at Small Business Loans.
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