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Federal business loans are an excellent option for businesses in need of looser credit than the banks and credit unions can provide on their own. They are a favorite among minorities, veterans, new businesses, and businesses that are short on experience or credit scores.
The most well-known federal business loan program is the Small Business Administration, or SBA. The SBA is not a lender itself, but rather a guaranteer of loans that are provided through banks. The SBA also exists to help people who have been affected by natural disasters. The SBA has a portfolio of 219,000 loans worth over $45 billion, making it the largest backer of business loans in the country.
Applying for a federal business loan through the SBA is a simple process. First and foremost, you will need to put yourself front and center with a picture, and provide any necessary documentation for whichever loan you are applying for. The SBA is lenient, but the loans it offers follow the basic rules of lending; the loans do need to be repaid, are subject to markets and are based on the national prime interest rate. The application will require a sound business strategy, complete with budgets and reasonable profit projections.
The SBA most commonly offers 7a guaranteed business loans, which can be used for material expansion and renovation, the purchases of equipment and utilities, the refinancing of existing debts and seasonal credit lines, construction, and the acquisition of new property and buildings. They also CDC/504 loans, which are administered in conjunction with the Community Development Corporation, a non-profit organization dedicated to helping communities finance business projects. These typically involve loans for brick and mortar construction or the purchase of new property.
There are also a number of federal business loans available to veterans through various programs. The veterans corporation and valoans.com are both organizations that provide information and resources to veterans looking for federal aid on their business projects.