Financial Assistance
The Small Business Administration (SBA)
Government, Banks And Entrepreneurs Working Together
The Small Business Administration's prime directive is supporting small businesses. The SBA's most well-known tools for supporting small business are its loan—specifically the 504 and the 7(a) loan programs.
The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets such as land and buildings. Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business itself.
The 7(a) is the most basic SBA business loan. The "7" and "a" refer to section 7(a) of the Small Business Act, which authorizes the SBA to provide loans. 7(a) loans are "guaranty only," which means they are provided by lenders who agree to structure their loans according to SBA's requirements. In turn these lenders receive a guaranty from SBA on a portion of each loan.
Industrial Development Bonds (IDBs)
Industrial Development Bonds (IDBs) are securities issued by State, certain governmental agencies or authorities, local government, or a development corporation. The proceeds are used to finance the construction of industrial plants or purchase of equipment, and expansion or relocation of qualifying manufacturing facilities.
