Starting and growing a business can be challenging, especially if you're operating on a tight budget. However, there are resources available to entrepreneurs that can help them succeed. One of these resources is the Small Business Administration (SBA).
In this blog, we'll explore how you can use the SBA to your advantage and take your business to the next level.
The Small Business Administration (SBA) is a government agency that strives to boost the economy by providing support to the numerous small business owners who pursue their entrepreneurial aspirations.
The SBA aims to prompt change and encourage progress by equipping small businesses with the resources necessary to launch, prosper, expand, or recuperate. Their programs include government contracting, granting access to capital, training for entrepreneurs, and policy advocacy for small businesses.
Government Contracting
If a business provides a service that the government deems valuable, the SBA can assist in bidding for and obtaining a contract to supply that service. The government has a target of allocating 23% of prime contracting funds to small businesses, which equates to approximately $100 billion annually. Even a small percentage of that amount can significantly aid numerous small businesses in their survival. Thus, rendering this opportunity immensely beneficial for all qualifying companies.
Access to Capital
Small businesses often require financial assistance, this is where SBA comes in. SBA links businesses to various funding options, ranging from microtransactions to venture capital. Due to the streamlined process, numerous small businesses initially opt to utilize the SBA as their primary financial resource and only seek external capital once they have gained a foothold.
Training for Entrepreneurs
The SBA also provides guidance for entrepreneurs, with a strong focus on training, education, and technical support for startup businesses. Most of the development programs spearheaded by SBA are free of cost, either online or in-person at any of their numerous training facilities. Although a few training sessions may involve a small fee, the cost is intentionally kept affordable, even for fledgling businesses.
Advocacy for Small Businesses
Although large corporations typically hold significant regulatory influence, small businesses are not entirely defenseless. The SBA is frequently summoned to testify before Congress regarding how proposed legislation may impact small businesses. Furthermore, it conducts extensive independent research that small businesses can leverage to better understand their current operating environment and navigate the obstacles they encounter.
Personal Background Statement and Professional Resume
As part of the initial SBA loan requirements, a written statement outlining your background is typically requested by most SBA lenders. This statement should contain verifiable information such as your previous addresses, names utilized, criminal history, and educational background.
In addition, when applying for an SBA loan, you will also have to submit a professional resume. This document serves as an essential tool for lenders to gauge your industry knowledge and business experience.
Your resume provides a valuable opportunity to demonstrate your qualifications to operate a small business and showcase how you plan to utilize your SBA loan effectively. This is especially critical if your business is in its beginning stages. That is why it is important to be detailed when it comes to crafting this document.
Personal and Business Credit Report & Score
Due to the limited borrowing history of small businesses, the SBA heavily relies on the business owner’s personal credit reports and scores to assess their borrowing and debt repayment tendencies.
Nonetheless, if your business has been operational for a substantial period, your lender may ask for a business credit report. As with your personal credit report, it is advisable to procure these documents for yourself before seeking a loan. This ensures that all information is precise and you are adequately prepared for any information your lender may encounter.
Personal and Business Tax Returns
Like your credit score, the SBA will scrutinize your tax returns to determine your fiscal responsibility when obtaining an SBA loan. Therefore, be ready to present your personal tax returns from the last two years. If you have not filed your taxes on time, you must furnish evidence of an extension and provide a written explanation for the delay.
In addition to your personal tax returns, the SBA lender will examine your business income tax returns and bank statements from the preceding two fiscal years. Any discrepancies observed in these documents could be considered a warning sign.
Business Plan
As part of the SBA loan application process, you will be required to submit a business plan outlining your company's future projections. The plan should contain both financial predictions, such as future cash flow, sales, and revenue, and the qualitative objectives of your business, such as mission, vision, core values, and company goals.
This document serves as an opportunity for you to persuade the lender in your own words that your business is worth investing in; therefore, it is crucial to devote adequate time and effort to craft a well-structured and convincing business plan.
Profit & Loss Statements
An income statement, also known as a Profit and Loss statement or P&L, provides an overview of your business's revenues and expenses over a given period. SBA lenders typically require a year-to-date P&L updated within the last 60 days, as well as full P&L statements for the past two fiscal years. Lenders will review your P&L to ensure that your business has a consistent cash flow that can handle unexpected expenses and meet your loan repayment obligations.
Collateral
In the event that the SBA lender views your loan as high risk, they may require significant collateral. This can either be any valuable assets that you are willing to put at risk in the event that you are unable to meet your SBA loan obligations. Examples of collateral may include your personal residence, other real estate properties, vehicles, or any significant equipment.
The Small Business Administration (SBA) can be a valuable resource for entrepreneurs and small business owners looking to grow and expand their businesses. By understanding what SBA can do for you and their application process, you can increase your chances of getting funding for your small business. With the SBA's assistance, business owners can take advantage of opportunities to grow their businesses, create jobs, and contribute to the economy.
So if you're a small business owner looking to take your business to the next level, consider exploring the resources available through the SBA. Also, you can listen to my podcast episode with Deb Curtis, an SBA expert, to learn more about how you can leverage the SBA to grow your business.