What are Small Business Loans?

Small business loans focus on providing funds for establishing or growing a small business. Each loan program has different criteria it uses to identify a small business. But, in general, the definition involves having no more than a certain number of employees and having a certain amount of annual income. The most public criterion is not having the internal resources to finance the business's needs. You will need to provide information on both your business and your personal financial situation. You need to provide information on ownerships, licensing, business plans, and other data to help the SBA determine eligibility.

Recent published funding opportunities: (Last updated: 2023-01-27)

Funding Opportunity
Innovation Corps (I-Corps) at NIH Program for NIH and CDC Phase I Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Grantees (Admin Supp )

Funding Number: PA 16 414
Agency: Department of Health and Human Services, National Institutes of Health
Category: Education, Environment, Health, Income Security and Social Services
Funding Amount: $50,000
PHS 2016-02 Omnibus Solicitation of the NIH, CDC, FDA and ACF for Small Business Innovation Research Grant Applications (Parent SBIR [R43/R44])

Funding Number: PA 16 302
Agency: HHS-NIH11
Category: Education, Environment, Food and Nutrition, Health, Income Security and Social Services
Funding Amount: Case Dependent
PHS 2016-02 Omnibus Solicitation of the NIH for Small Business Technology Transfer Grant Applications (Parent STTR [R41/R42])

Funding Number: PA 16 303
Agency: HHS-NIH11
Category: Education, Environment, Food and Nutrition, Health, Income Security and Social Services
Funding Amount: Case Dependent
Small Business Innovation Research Program (SBIR) Phase II 93.433 HHS/ACL/NIDILRR

Funding Number: HHS 2016 ACL NIDILRR BISB 0182
Agency: HHS-ACL
Category: Science and Technology and other Research and Development
Funding Amount: $575,000
Small Business Development Centers in Central America

Funding Number: WHAP WHAAQPPC 16 004
Agency: DOS-WHA
Category: Business and Commerce, Community Development, Employment, Labor and Training
Funding Amount: $1,188,118
Small Business Regional Training

Funding Number: WHAP WHAAQPPC 16 002
Agency: DOS-WHA
Category: Business and Commerce, Employment, Labor and Training
Funding Amount: $990,099
HHS/ACL/NIDILRR: Small Business Innovation Research Program (SBIR) Phase I

Funding Number: HHS 2016 ACL NIDILRR BI 0142
Agency: HHS-ACL
Category: Science and Technology and other Research and Development
Funding Amount: $75,000
FY 2016 Small Business Innovation Research (SBIR) Program – Phase II

Funding Number: 2016 NIST SBIR 02
Agency: DOC-NIST
Category: Other (see text field entitled Explanation of Other Category of Funding Activity for clarification)
Funding Amount: Case Dependent
FY 2016 Small Business Innovation Research (SBIR) Program

Funding Number: 2016 NIST SBIR 01
Agency: DOC-NIST
Category: Other (see text field entitled Explanation of Other Category of Funding Activity for clarification)
Funding Amount: Case Dependent
Small Business Alzheimer's Disease Research (R43/R44)

Funding Number: PA 16 091
Agency: HHS-NIH11
Category: Health
Funding Amount: Case Dependent

 

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Types of Small Business Loans

According to GovLoans.gov, there are ten small business loans available through the federal government. The most basic is the 7(a) small business loan. This loan is the foundation of those offered by the Small Business Administration. These loans go through private lending institutions with a loan guarantee coming from the SBA. An applicant must meet the SBA's size requirements, be able to repay, and run for-profit. There are different variations on the 7(a) loan that may have other requirements. Everyone interested in this loan program will need to find a private lender who works with this type of loan.

Another type of small business loans available from the SBA is the Economic Injury Disaster Loans. These loans focus on providing funding to businesses in declared disaster areas. These loans cover losses not covered by insurance or other programs. The loans come with low-interest and allow the owners to pay over several years. The cap for these loans is $2 million. Another form of this loan is the Business Physical Disaster Loans. These loans focus on providing funds to repair or rebuild physical buildings or replace critical machinery or inventory to the business not covered by insurance. The Military Reservist Economic Injury Disaster Loan Program offers assistance to a business when an "essential" employee gets the call to active military duty from the reserve.

The Business & Industrial Guaranteed Loan Program focuses on providing funds for businesses located in rural areas. These businesses must meet criteria for providing employment and improving the local economy. These loans are also available to those who wish to develop environmental resources. The CDC/504 loan program focuses on helping businesses acquire major fixed assets such as buildings or land. The CDC stands for Certified Development Company. Applicants will provide at least 10% of the funding with the CDC providing 40% and a private investor providing the other 50%.

The Equity Investment - Small Business Investment Company Program provides long-term loans, management assistance, and equity capital towards small businesses. The SBIC is a network of privately owned businesses which offer capital from both the SBA and the private sector to fund businesses of all sorts. These for-profit entities often specialize in a particular industry. The Indian Loan Guaranty, Insurance, and Interest Subsidy Program offers assistance for businesses to obtain financing for businesses developed to improve the economy of the reservation or a given service area. This is not a direct loan program but a program to assist in finding private investors.

The Microloan program provides loans smaller than $35,000 to businesses around the country. These loans go through non-profit organizations that screen and approve the borrowers. Each lender has its own criteria as well as meeting the SBA requirements. The idea of these loans is to provide the fund necessary for an applicant to get their business off the ground. The final loan program is the Short Term Lending Program offered through the Office of Small and Disadvantaged Business Utilization. This loan focuses on providing short-term loans to transportation contracts.

How to Apply for Small Business Loans

In order to apply for small business loans backed by the SBA, you first need to find a lender who provides these loans. Many banks have an office dedicated to helping small businesses. If you have trouble locating such a bank in your area, you can contact the SBA for a list of participating lenders. Once you have a bank in mind, the next step is going to be filling out the paperwork necessary to apply for the loan. This is the part that many people find intimidating. There is a great deal of paperwork involved. However, a good lending officer at a bank can help walk you through the process.

An essential step in applying for small business loans is assessing your funding requirements. Don't borrow money just because the money is available. Many businesses may find they have enough assets, but need a boost in working cash to help them keep inventory and products flowing as needed. Other businesses may need help in leasing or buying a larger facility to expand their business. The assessment needs to look at the state of the business's industry and the general economy. You also need to know if your business is cyclical or seasonal. All of this goes towards building a strong application package.

The loan application package needs the following information: completed loan application, personal background statement, personal financial statement, business financial statements, projected financial statements, ownership documentation, business license, documentation on prior SBA loans, income tax returns for business, personal tax returns, resumes, business overview, and business leases. The SBA website offers full details on each part of the application package. Once completed, the application package goes to the lender for review. The lender will need to evaluate the application based on the bank's standards as well as the SBA's.

The SBA offers more flexible terms than the typical private loan. However, the applicant must still provide a good credit and business history to qualify. If the bank accepts the application, the next step is to sign the loan papers. Part of the final package is the SBA's guarantee to the bank that they are backing the loan against the borrower's default. However, do not think that it is a free pass on defaulting on the loan. Both the bank and the SBA can go after a borrower if they fail to meet their financial obligations towards the loan.

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