Sources of Financing: The Government

Federal, state and local governments have become progressively more active in business financing in order to facilitate growth in the local tax base, increase employment or accomplish certain other social goals.  There are numerous programs available depending on the size of the company, the location of the business and the ownership profile.  Small Business Administration (SBA) loans, economic development area incentives and specific bonds issues are some examples of this type of financing.  Usually the funds are made available through low cost loans with or without government guaranties or certain specific tax incentives.  Terms vary by program and individual application. 

U.S. Small Business Administration (SBA) loans are probably the best known and most widely accessed of the government programs.  These loans are made by local banks and are guaranteed by the SBA.  The SBA’s guaranty makes it easier for the bank to make loans on terms it would not otherwise be in a position to make available.  There are several types of loans available ranging from $5,000 to $2,000,000 with varying purposes including commercial mortgages, equipment term loans, general purpose term loans, working capital lines of credit and business acquisitions.  Successful applications will include a well developed plan with:

• a narrative on the company background, the principals and the outlook,
• company historical financial information and financial forecast including cash flow with assumptions,
• a use of proceeds and,
• personal financial statements and tax returns for the principals.