While Mr. BizPlan is on summer vacation Brandon Laughridge of www.SBALoans.com offered to fill in for this months small business loans post. Enjoy!
For most small business owners, soliciting venture capitalists isn’t part of the standard business plan…Now, it probably should be near the top of the list.
A little-known SBA loan program that directs venture capital to small businesses just got a big boost from the federal government. American entrepreneurs now have access to a $2 billion pool of capital aimed at spurring economic recovery and growth.
The SBA’s Small Business Investment Corporation (SBIC) program loans money to qualified venture capitalists. These federally licensed firms can use tax dollars to supplement private capital with a catch – they must help fund small businesses.
SBICs provide crucial capital for small businesses, from startup funding for fledgling companies to cash for growth and development for more established firms. Any business that meets the SBA’s definition of a small business can receive SBIC funding.
That funding pool is significantly deeper today. Provisions in the federal stimulus package (the American Recovery and Reinvestment Act of 2009) altered some of the program’s rules and restrictions. The goal was to free up even more capital for small business lending.
Some of the changes include:
- SBICs can now obtain up to $150 million in federal dollars for a single fund, instead of the former maximum of $137 million
- SBICs have to invest 25 percent of their capital into small businesses
- SBICs can now invest up to 30 percent of an SBA-backed fund into a single company, instead of only 20 percent
- SBICs with multiple venture capital funds can borrow up to $225 million total
The SBIC program has doled out more than $55 billion in venture capital to more than 100,000 small businesses since its creation in 1958. Companies like Apple and FedEx have received SBIC funding.
U.S. Sen. Olympia Snowe, R-Maine, lauded the provisions in mid-July.
“SBICs provide critical investment dollars to thousands of small businesses nationwide, and by implementing the provisions we passed in the Recovery Act, the SBA will make this program significantly more effective,” said Snowe, ranking member on the Senate Committee on Small Business and Entrepreneurship. “As I noted in a letter to SBA Administrator Mills last month, while $3 billion of SBIC debentures were available for Fiscal Year 2008, the SBA used a meager $650.3 million, or 21.7 percent, of that funding. Putting these vital steps into action will help reverse this trend of underutilization.”
Learn more about SBA loans at the SBA’s website or with this Small Business Loan Guide from SBALoans.com.
Brandon Laughridge
How difficult will it be for me to get an sba loan, seeing I have bad credit, no collateral, and I am an ex-felon. I have excelled in this business before, and I just need a chance
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The biggest problem will be the felony. There are some convictions that will be an automatic decline and some that depend on the nature of the conviction and amount of time that has past since you were charged. Bad credit on the other hand is a little easier to overcome…especially these days when the average credit score has sunk from 700 to around 685 (read this article for more on bad credit and business loans . Collateral on the other hand is tricky…typically, I would say get an SBA guarantee to shore up the risk on that loan but in this case that brings us back to #1. All that said…maybe you should consider bootstrapping the business. In other words skip the debt and just start small as a side businesses and grow it using cash flow. Or if you really want to get a loan you could try P2P financing sites like