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Keith Girard wrote an insightful column, SBA Ill-Equipped to Handle Obama Stimulus Funds, explaining challenges the SBA is confronting. The Act, which was signed into law on February 17, 2009, requires the SBA to present Congress with an execution plan by April 18. Reading the legislation, it is not clear whether SBA-approved lenders will be able to access increased funds for loans until after the SBA’s plan is approved.
While contemplating the structure of this column, Donna McCue, CEO of Fat Ass Fudge, asked about funds to expand her business. Her questions were typical of entrepreneurs who develop an exceptional product that is selling briskly; they discover their company can grow as fast as capital will allow.
- How small does a company need to be to qualify as a small business?
The SBA developed a definitive size chart which matches the standards set by the North American Industry Classification System Codes. You may be surprised by how large a company can be to qualify for funds, if you own a micro-business.
- How does an entrepreneur, who used her own money or investor seed money to determine whether there is a real market for products, borrow the money to grow a company?
Truly good news: The SBA has received a mandate for viability along with funding increases. And the guarantee on loans from SBA-approved lenders has increased to 90 percent. With solid personal and business credit histories along with a strong nascent or start-up enterprise concept, your chances of being able to fund your business have improved substantially over available SBA resources during recent years. Every funding process is an investment in you and your business. The investor wants to know you and your company will be low risks. If business borrowing is a new experience for you, the best first stop can be a Small Business Development Center. The better managed ones maintain deep community roots along with business development expertise. The SBA also offers a free online course, How to Prepare a Loan Package.
- How much planning do you need to do?
A solid business plan is always required, when seeking business financing. Donna prepared a comprehensive 5-year plan before she started her company – with an understanding that a plan is a living document. Rolling forecasts need to be updated. Marketing successes can determine more rapid growth than anticipated. Fat Ass Fudge is a model situation for a start-up. Many of us begin with a short-term plan, which we revise when we realize we actually have a viable business. You must develop a reality-based business plan to secure SBA funding. There are many biz-plan-in-a-box software packages available in addition to dozens of helpful books. This process has been agonized over and mystified way too much. Business plans need not be complex. You can do it!
- What can you borrow money to do?
SBA offers a guaranteed loan classification called a 7(a) loan. Fat Ass Fudge needs to move from its borrowed professional kitchen to its own space. An SBA loan can be used for these purposes:
Commercial real estate (purchase, construct, refinance)
Machinery, equipment, fixtures, furniture
- How much money can you borrow?
Between $25,000 and $2,000,000
In addition, if you have not cultivated a friendship with your banker, do it. Donna, a personable natural marketer, habitually takes her gourmet candy to her banker. I expect her to secure sweet funding to grow her company.
SBA website warning: Appointment of the new Administrator of the SBA, Karen Gordon Mills, is in a Senate approval queue. Until she takes the reigns at the SBA, there is an acting administrator, who is a career SBA senior executive. While the website has improved a little since January 20, some significant documents are out of date. SBA offers a massive amount of information which could be helpful to a business owner. However, it can be extremely difficult to find what you’re searching for and their search capability rarely produces what is sought. If you venture onto the SBA website, you may experience the frustration I feel whenever I’m looking for information there. You can join me in hoping the whole website gets a makeover, making their wealth of small business knowledge easily accessible.
The agency awaits new leadership and their website languishes while changes included in the stimulus bill can be celebrated as positive developments for small business, after long-term neglect of the SBA during the Bush Administration.