Small Business Loan Government Options to Consider


Minyang Jiang

As a small business owner, investment capital is crucial to the continued success and expansion of your business. However, many business owners run into difficulties when applying for loans, as there are numerous eligibility requirements that many companies fail to meet. For new businesses, those with poor credit, or those with low monthly revenue, qualifying for traditional loan options is nearly impossible. In response to this growing difficulty among business owners, the government eagerly backs loans to help entrepreneurs secure the funding they need. Given the loans are partially secured by the government, it enables lenders to take greater risks on applicants, allowing them to open their doors to a wider demographic of businesses.

Small Business Loan Government Financing

The U.S. Small Business Administration (SBA) is the largest provider of government-backed loans in the U.S. and has been financially assisting small business owners since 1953. The SBA offers numerous different types of loans to cater to the varying needs of growing businesses. To qualify for any SBA loan, the applicant needs to be a U.S. citizen, while operating a business that qualifies as small per their regulations. The regulations vary based on industry, but businesses typically need to employ fewer than 500 employees and earn less than $7.5 million per year.

Business Loans

The SBA offers traditional business loans that can be used to cover startup costs, as well as routine operational expenses. Loans of up to $5 million are available, with repayment terms averaging 5 years. To qualify, the SBA requires collateral to secure the loan, and the amount of collateral needed will be negotiated with the applicant based upon their individual ability.

Equipment Loans

Equipment loans can be used to purchase the company vehicles and machinery needed to perform the functions of the job. Since equipment often poses one of the largest startup costs among businesses, equipment loans can provide entrepreneurs with integral funding to optimize business efficiency and increase the chances of succeeding in their industry. Loan amounts for equipment are negotiated with the applicant based on individual need and the purpose of the funding, with $5 million being the maximum. Collateral is necessary to secure the loan, which usually consists of surrendering your business should you default on payments. Repayment plans can be up to 10 years but will depend on the amount owed, as well as your eligibility.

Commercial Real Estate Loans

Commercial real estate loans provide businesses with access to all of the financing necessary to secure their ideal storefront in a prime location. With repayment terms varying between 10 and 20 years, it provides a viable option to secure property as businesses work to build their returns. Loan maximums are set at $5 million but are issued depending on need and eligibility. In order to qualify, you must demonstrate sufficient need for the funding, as well as provide a business proposal detailing exactly how the money will help to launch or grow your business.

Industry Specific Government-Backed Small Business Loans

There are a lot of general options for government-backed small business loans. But the government also offers industry and sector-specific funding solutions that may be a better fit for your business.

U.S. Department of Agriculture (USDA)

The USDA provides government-backed loans to farmers in order to encourage crop production and enhance the revenue of agriculturalists. They guarantee loans to farmers who are unable to qualify for traditional bank loans and are willing to supply financing to those with poor credit, low monthly revenue, and no collateral. They provide loans for farm equipment, crop production, and marketing costs, enabling agriculturists to build a flourishing business more easily.

For small business owners, finding reliable funding options can be a constant headache. Given that small businesses play such an integral role in the U.S. economy, the government is willing to provide partially secured to loans to struggling business owners as a means of strengthening the economy and encouraging the creation of jobs. For those who have been turned away from traditional loan options, government-backed loans can provide business financing that is easier to qualify for and entails lenient, long-term repayment plans.

Taking the time to research various financing options will help you choose the solution that is best-suited for your needs. In addition to small business loan government options, you may also want to consider other small business loan and alternative funding solutions. No matter what modern business funding solution you’re looking for, Credibly can help.