A significant part of small business financing comes from government business loans the US federal government offers. In addition, different types of government grants are also available. However, grants are available for existing businesses only. Although entrepreneurs use various means to raise the capital required for starting and running businesses, they mostly avail government loans for entrepreneurs. Startups especially find it most challenging to arrange for finances to launch the business but getting a loan from the government is relatively easy. Meeting the qualifying parameters should help secure one of the many types of loans the government offers for businesses. Ongoing businesses that need funds for growth and expansion can apply for government loans earmarked for businesses.
Government Business Loans Help to Strengthen Finances
The federal government offers different types of student loans, housing loans, and small business loans. In addition to offering loans, the government offers other funding options, mainly in the form of different financial programs to assist businesses.
Why Take a Business Loan?
Government loans for business are beneficial for entrepreneurs to finance their business at any stage, from startup to expansion. Taking government loans for business is comparatively easy than other types of business financing. Sometimes, entrepreneurs take loans to restructure their finances by paying off other debts that seem burdensome. Financial consolidation and improving the credit score are benefits of taking a business loan. Those who face trouble availing of bank loans because of the cumbersome and lengthy process would find it easier to avail of SBA loans backed by the government.
The government channelizes its loan programs through the SBA or Small Business Administration, and the reason people equate SBA loans with government loans.
The Government Facilitates the Loan Programs
The government is a facilitator in helping businesses avail of loans. Various government financing programs help create a loan package with a willing lender. The federal government guarantees a portion of the loan, meaning the borrower defaults if the lender. The government’s involvement in the loan tenure gives more confidence to lenders. Therefore, all government loans for business are available much faster than traditional bank loans.
Types of Government Loans
SBA loans are most popular as they offer financial assistance for startup and operating businesses, encourage exports, and handle disasters. The SBA 7(a) loans are available for funding businesses, and the maximum amount available is $5 billion. SBA microloans and SBA 504 are the other types of loans for entrepreneurs.
USDA loans – The US Department of Agriculture offers loans, especially for rural businesses. These loans have similarities with SBA loans because of the government guarantee that relieves both borrower and lender.
Government business loans are synonymous with SBA loans that help entrepreneurs gain easy access to finances for the business.
