There are several government programs today that serve to help small businesses in accessing and performing government contracts. Some government programs are designed to assist small businesses in general or give an impetus to entrepreneurs for starting and expanding business and others that are targeted at specific categories of small businesses specifically run by women, minority-owned as well as veteran-owned businesses.
Although the federal and state governments do not necessarily provide grants for starting and expanding small businesses the U.S. government offers a wide-variety of low-interest loans and venture capital financing programs to help entrepreneurs start and grow their businesses. Moreover, some federal and state agencies also give a limited number of grants for very specialized business activities such as scientific research and development.
Following are a list of such government programs to promote small businesses:
SBA Loans
The U.S. Small Business Administration is a federal agency and the single largest financial backer for the country’s small businesses operations. In recognition of the fact that small businesses are critical to the growth and stability of the economy of any nation, its aim is to counsel, aid, assist and protect the interest of such businesses and maintain a free competitive enterprise thereby strengthening and building the future of the country. It includes a portfolio of business loans, loan guarantees, training and Educational programs, advisory services, publications, financial programs, contract assistance as well as disaster management loans. The role of the SBA is to assist small business owners to start and expand their businesses by helping them get loans through private banks and financial institutions. SBA is not a lender and does not grant loans directly to businesses. It is in fact a guarantor of loans made by privately owned banks and other financial institutions that agree to follow SBA’s guidelines. To apply for an SBA loan, you first need to go through a local participating bank or financial institution. The loan application is like applying for a commercial loan, structured according to SBA requirements, which receives an SBA guaranty. This guaranty is a portion of the loan the SBA will pay back to the lender should you default on your loan payments.
USDA Loans
If you own a farm and earn an income through agricultural means, the U.S. Department of Agriculture (USDA) has a Business and Industry (B&I) Guaranteed Loan Program that works in a similar manner as SBA loans. The USDA provides guarantees of up to 80% of a loan made by a commercial lender and the loan proceeds can be used for working capital, purchase of machinery and equipment, buildings and real estate as well as some kinds of debt refinancing. Similar to an SBA loan you are required to go through your local bank or financial institution to apply for a B&I loan.
Small Business Investment Companies (SBIC)
These were specially created to help small companies to raise capital. SBIC’s are privately owned and managed investment firms that provide venture capital and start-up financing to small businesses. The eligibility criterion for SBIC financing requires that your business meet certain SBA size specifications like having a net worth of $18 million or less, and after tax income on an average should not have exceeded $6 million in the past two years. When applying for an SBIC, you must present a viable business plan that includes your company operation, management, financial status and funding requirements.
New Markets Venture Capital (NMVC) financing
If your business is located in a low-income geographic area, you may be eligible for NMVC financing typically modelled after the SBIC program. It makes equity investments in small businesses located in economically distressed communities in both, urban and rural areas.
Active Capital
Active Capital is a nationwide listing service that connects entrepreneurs with angel investors while complying with federal and state securities regulations. Potential investors can obtain information on new and entrepreneurial as well as expanding small businesses seeking $250,000 to $5,000,000 in venture capital.
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