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Using The Government To Get Funding For Your New Business

There are a variety of options for new entrepreneurs to
acquire funding
for their new businesses. It is beneficial that they comprehensively
research their choices to ensure they find an option that is best suitable for their
unique situation. One of the things that new business owners need to consider is
the level of control they want over their company. If company founders do not want
to share control with other partners, then options such as angel investors and venture capitalist funding
are not good alternatives. Since many entrepreneurs do not have enough disposable
income to fully fund a new business, then they will have to explore other options
to obtain business capital.

What the Small Business Administration can do for you
One way to get funding for a
new business is to utilize the help of the government. There is different options
available for small business owners from government and local authorities in the
form of low-cost loans and grants. While the Small Business Administration does
not provide this type of financial assistance directly to entrepreneurs, they do
work alongside local banks that will offer such funding to qualified applicants.

SBA grant requirements
The SBA will be able to advise the proper options that are available for an
entrepreneur’s

type of business from a list of federal and state grants. State-funded grants are
non-repayable but extremely competitive to obtain. Such incentives are often given
to businesses in certain industries and locations, particularly in areas that are
being revitalized and in fields such as education, science, research, engineering,
and/or non-profit ventures.

Often times, grants are awarded to encourage and assist small business entrepreneurs
by stimulating local economic development through employment opportunities and community
involvement. Female entrepreneurs and ethnic minority groups are probably the largest
recipients of small business federal grants. The SBA encourages small business development
in these fields by not only giving access to
business capital
but also educational,
training, and networking opportunities to make their businesses thrive.

SBA loan requirements
Through local lending institutions, the SBA acts as a guarantor to those who qualify
for small business loans. The loans are usually offered at very reasonable rates;
however, the borrower must meet certain criteria in order to obtain such funding.
One requirement of the applicant is to have a strong credit rating because it is
indicative of their repayment history and financial motivation to pay off any existing
debt. Applicants who have poor credit ratings and/or have filed for bankruptcy in
the past demonstrate their difficulties in paying back any borrowed money and will
most likely be unapproved for federal and state loans.

The second requirement for approval of SBA loans is the entrepreneur’s personal
investment in his/her own business. The business owner is required to have invested
at least 25% to 50% of their own personal capital of the loan amount requested.
By investing his/her own capital in a company, the entrepreneur will show others
they truly believe in their business
ideas
and are serious in moving their company forward.

Another major prerequisite for SBA loan approval is a comprehensive business plan.
This plan should detail the company’s objectives and how the
new business
will distribute
the prospective loan amount in order to stay financially sound throughout its development.
It is necessary for every entrepreneur to have a solid business plan and confidence
in their investment. It may also help if a new business owner has established a
good relationship with credit rating firms and/or have prospective traders and suppliers
who are willing to work with them should the company successfully launch. In this
manner, an entrepreneur can add credibility to their loan application process.

Conclusion
Finding ways to
raise capital
for a new business is perhaps one of the most stressful
aspects a new entrepreneur will face. From angel investors to bank loans, the choices
are numerous. By conducting research, a new business owner will be able to find
an option that is most compatible with their unique situation. If they do not like
the idea of sharing ownership with others, then angel investors and venture capitalists
may not be a viable option to consider. However, with the help of the SBA and certain
criteria, they may be able to qualify for federal small business loans and grants.

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