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Here’s Your Quick and Easy Guide to the Small Business Administration

Ben Rashkovich

Ben Rashkovich

Content Strategy Manager at Fundera
Ben is the resident wordsmith and grammar guru at Fundera. He makes sure their top-notch content stays accessible, interesting, and useful for small business owners. Previously, Ben wrote for the Columbia Spectator and eBay's curatorial team.
Ben Rashkovich

If you’re currently a small business owner, you’ve probably heard of the Small Business Administration. If you’re thinking of starting a business, you’ve probably heard of the Small Business Administration. If you know a small business owner, you’ve probably still heard of the Small Business Administration.

So what’s the deal? Why do small business owners all care so much about the Small Business Administration?

While it’s an important government agency, it’s also a big, potentially confusing one. The Small Business Administration (also called the SBA) does a lot, and you’ll be a lot better off if you’re totally aware of every way they can help.

For example, many entrepreneurs are aware that the Small Business Administration can get you a large, low-cost SBA loan… But did you know they can also help you secure government contracts, find business grants, meet other business owners, or take online courses?

If not, you could be missing out.

Let’s take a close look at where the Small Business Administration comes from, what it offers today, and how it can help you start, manage, and grow your small business.

What’s the Story Behind the Small Business Administration?

While you don’t need to know the rich and detailed history of the Small Business Administration in order to get a low-cost loan or secure a big government contract, it can never hurt to be informed.

Plus, we just think it’s fun. But if you’re not too interested in a short history lesson, feel free to skip to the next section.

Officially, the Small Business Administration got started in 1953—but that’s not the whole story. Let’s take a quick walk through the colorful history of the Small Business Administration, starting way back, before the SBA as we know it even got started.

The Small Business Administration… Before the Small Business Administration

So, what happened before 1953 that led to the birth of the Small Business Administration?

Well, you probably know about the Great Depression: the large, devastating, far-reaching economic disaster from the 1920s to the late 1930s. In 1932, during the last year of his presidency, Herbert Hoover created a few federal agencies with the power to bail out the economy instead of letting it slide down.

One of these agencies was the Reconstruction Finance Corporation, or the RFC. The RFC could loan up to $2 billion to important institutions—mainly banks that weren’t served by the Federal Reserve, but also railroads, mortgage associations, and more. Its loans could also be backed by collateral that the Federal Reserve didn’t accept.

The idea was to save the banking industry and restore confidence…

But sadly, $2 billion in 1932 was too little, too late, to fight back against the Great Depression alone. While the RFC slowed the Depression down—bailing out a number of smaller banks and local governments—it wasn’t enough.

Then Franklin Delano Roosevelt took over—and gave the RFC a lot more lending power. In 1942, at the onset of America’s involvement in World War II, FDR also created the Smaller War Plants Corporation (SWPC). This new agency could give direct loans to businesses, as well as encourage banks and advocate to other government agencies. This helped small businesses keep up with their bigger competition in the wake of the war effort.

After WW2 ended, the RFC took over the SWPC’s responsibilities—and at the same time, the Office of Small Business started focusing more on small business education, imparting their wisdom on entrepreneurship, finances, and management to a growing population.

If you know about the Small Business Administration at all, then this might be starting to sound familiar. Government agencies, lending to small businesses, offering education and advocacy?

Yup—that’s the Small Business Administration in a nutshell for you. The RFC was dissolved in 1953, but President Eisenhower decided to keep its activities a priority by starting the Small Business Administration instead.

Which brings us to…

1953: The Small Business Administration Is Born

Over the past 60 years, the Small Business Administration has given their own loans, guaranteed bank loans, helped disaster victims, ensured government contracts, offered counseling and mentorship opportunities, established state and local offices, and much more.

The Small Business Administration has had its ups and downs in its time, though. Let’s take a look at just a few.

In 1958, the Small Business Administration gained the power to license privately owned and managed Small Business Investment Companies (SBICs) that have the authority to provide both debt and equity financing to small businesses.

That’s because the Federal Reserve carried out a study whose results showed that small businesses across the country simply couldn’t keep pace with technological innovation. Because they didn’t have enough access to credit. The SBIC program has been a huge success: with no cost to taxpayers, thousands of small businesses receive billions in investments.

In 1964, the Small Business Administration expanded its focus to take on issues related to poverty as well. By honing in on small businesses in low-income areas, as well as by servicing female and minority entrepreneurs, the Small Business Administration became an agency for more than just your everyday small business.

In 1996, there were talks of shutting down the Small Business Administration, although it received an all-time high budget in 2000. Then again in 2004, it was threatened with dissolution—and some of its expenditures were frozen—but it came back to life under President Obama.  

The Small Business Administration Today

Today, the Small Business Administration doesn’t make direct loans to small businesses, but it still helps entrepreneurs in a variety of different ways—from guaranteeing bank loans to facilitating government contracts, offering guides and educational videos, promoting local mentorship, and more.

In other words, if you need help starting, managing, or growing your small business, you should probably head on over to the Small Business Administration.

And just in case you were curious, the current and 24th administrator of the Small Business Administration is Maria Contreras-Sweet, who previously served as secretary of the Business, Transportation, and Housing Agency of California. She worked in private and public sectors, including banking, where she focused on small business concerns.

The Small Business Administration’s Mission

The Small Business Administration’s mission can be summed up by 3 C’s:

Capital, contracts, and counseling.

We’ll get to the specifics of these goals in a bit—not to worry. Just about any small business owner can find something they need with the Small Business Administration.

We’ll break it down piece-by-piece, by broadly speaking, they offer:

  • Guides, resources, and advice
  • Small Business Administration loans
  • Venture capital investments
  • Grants for science and technology
  • Government contracts
  • Networking and local assistance

Check out the category that fits your business—or read them all to get a full understanding of what the Small Business Administration can give you. You might be surprised by some financing options or resources.

Let’s take a look at what they offer.

The Small Business Administration: Guides, Resources, and Advice

On the Small Business Administration’s website, you can check out a truly staggering amount of guides, how-tos, walkthroughs, videos, online courses, and more. In fact, if you have a question about owning or running a small business, the Small Business Administration probably has your answer.

They’re broken down into 2 general categories: starting a business and managing a business. Let’s take a look at each, plus their online course selection.

Starting a Business, According to the Small Business Administration

If you’re looking to learn more about starting a business, then you’re in luck—the Small Business Administration has plenty of useful content for you to explore.

Here’s a long (but not comprehensive!) list of questions that you could get answered by the SBA about starting a business:

And much, much more.

That’s only a snapshot of what the Small Business Administration offers. So if you’re thinking about starting up a business and need to learn about the logistics behind taking the first few steps, don’t miss their content.

Managing a Business, According to the Small Business Administration

Different stage of business ownership, same deal. The Small Business Administration has a ton of articles, guides, templates, videos, and lists that will help you understand what it takes to manage the absolute best small business possible.

The SBA can answer just about anyone’s business questions, from a new entrepreneur to even the most seasoned small business owners.

Let’s start with the basics. With the Small Business Administration, you can learn about…

As if that weren’t more than enough, the Small Business Administration also offers business guides for 21 different industries. Whether you’re into construction, pharmaceuticals, print and publishing, or aerospace defense, there’s a guide for you. And each one is filled with specific, unique laws, regulations, government opportunities, and more—there’s no repeat information.

Then, just in case you’re curious, you can answer some more specific questions…

No matter what kind of help you’re looking for, the Small Business Administration is sure to have some.

The Small Business Administration’s Online Courses

Finally, the Small Business Administration offers dozens of online courses (currently they’re at 61), on topics ranging from buying a business and crime prevention to small business financing, marketing 101, and starting a franchise.

So if you’re the type of learner who benefits more from videos, worksheets, and interactive material, make sure to check out this segment of the Small Business Administration’s website.

The Small Business Administration: SBA Loans

Probably one of the best-known purposes of the Small Business Administration?

SBA loans.

This kind of debt financing is famous for its low cost, long term, and large amount of capital. Plus, it’s accessible to relatively new small business owners.

In other words? SBA loans are some of the best loans around, and since they’re aimed at small businesses that might get rejected by banks, you don’t need to be perfect on paper to get one.

There are some downsides to SBA loans—they take a long time to apply for, require lots of documentation, and have pretty strict criteria compared to other alternative, non-bank business loans. They’re not for everyone. But that doesn’t change the fact that, for many small businesses, an SBA loan could make a huge impact.

One more thing:

The Small Business Administration doesn’t make direct loans. Instead, they’ll guarantee loans made by banks and other lenders.

A bank that otherwise might not have lent money to you without seeing 5 more years of successful business management could be persuaded by the Small Business Administration. If 90% of the loan is guaranteed (or backed up by the SBA, basically), then that bank doesn’t have a whole lot of risk.

What Does It Take to Qualify?

While each business and loan application is different, you can count on a few things if you’re applying for a Small Business Administration loan.

First, you’ll need to be a small business (as defined by the Small Business Administration). This might seem obvious, but the definition of “small business” depends on a few different factors and depends on your industry—so double check!

Second, you can’t belong to the Small Business Administration’s list of ineligible industries. A few include:

  • Lenders and banks
  • Life insurance companies
  • Foreign businesses
  • Businesses reliant on pyramid schemes
  • Gambling houses
  • Private clubs with restricted membership according to race, religion, ethnicity, and so on
  • Speculative businesses
  • Religious businesses

Finally—although the Small Business Administration doesn’t mention this—your personal credit score will be a major part of your SBA loan application. The higher your score, the more likely it is that you can qualify for a loan.

In fact, the SBA loan process takes so much time and energy that you might want to consider working on your credit score before sending in an application so you don’t waste your time.

But what sorts of SBA loans are there?

Let’s take a quick look at the Small Business Administration’s 4 basic business loan programs:

1. The Small Business Administration’s 7(a) Loan Program

The 7(a) program is the Small Business Administration’s most popular loan: business owners can get large amounts of capital, with long terms, for low interest rates.

Plus, the 7(a) program comes with very few limitations on how you use the money. Whether you need a term loan to start a new project, expand to another location, or something else, the 7(a) loan could work for you.

Amounts: No minimum, $5 million maximum.

Fees: Based on your loan’s maturity and size, your guarantee fee may be included in the price of the loan. Sometimes your lender will pay this, but sometimes they’ll roll the fee over to you.

Rates: Generally, 6%-13%.

Terms: 7 years for working capital, 10 years for equipment, and 25 years for real estate, with monthly repayments.

Uses: Short-term and long-term working capital, equipment, real estate, inventory, furniture, supplies, construction, renovation, acquisition, debt refinancing. (Check the full list.)

2. The Small Business Administration’s CDC/504 Loan Program

On the other end of the spectrum is the Small Business Administration’s CDC/504 loan program, which limits your loan usage to fixed asset purchases like real estate or equipment.

But on the flipside, these loans often come with the lowest interest rates around. So if you’ve got the time to apply, and you’re looking for cash to fulfill one of these use cases, then you should consider the CDC/504 loan.

Amounts: $5 to $5.5 million maximum.

Fees: You’ll generally need to pay 3% of the loan amount in fees. Plus, you will probably have to front 10% of your fixed asset purchase in order to secure this type of financing.

Rates: 5%-6%.

Terms: 10 to 20 years.

Uses: Buying land, existing buildings, infrastructural improvements, new or renovated facilities, and long-term equipment or machinery. (You cannot use a CDC/504 loan as a debt consolidation loan or a way to refinance your existing debt).

3. The Small Business Administration’s Microloan Program

If you’re a new or young business looking for just a bit of capital to get started, then the Small Business Administration’s microloan program could be ideal. You’ll have a lot of flexibility in terms of usage, and not too much money that you feel burdened or unable to repay.

Amounts: Up to $50,000, with an average of $13,000.

Fees: None.

Rates: 8%-13%.

Terms: Monthly repayments for up to 6 years, depending on the size of your loan and use case.

Uses: You cannot purchase real estate or refinance debt with a Small Business Administration microloan, but you can use it for working capital, inventory or equipment purchases, and more.

4. The Small Business Administration’s Disaster Loan Program

Finally, the Small Business Administration also offers disaster loans to households, businesses, nonprofits, renters, and more to cover damage done by economic or natural disasters.

If you’ve had equipment, inventory, real estate, machinery, or other business assets harmed or destroyed by a disaster, then consider looking at one of the SBA’s many disaster programs.

No two disaster incidents are the same, so there’s no standard measure of what a disaster loan would look like, but the SBA generally offers up to $2 million in disaster recovery funding, with rates of up to 4% if you don’t have credit elsewhere and 8% if you do, and terms of roughly 30 years.

You can use a disaster loan to recover your business to its pre-disaster state, but you cannot make improvements unless required by law.

The Small Business Administration: Equity Financing

If debt financing isn’t what you’re looking for, then not to worry—the Small Business Administration can also help you find equity partners, too.

And it does so through a program created by Congress way back in 1958: the Small Business Investment Company initiative.

SBICs & The SBA

Small Business Investment Companies, or SBICs, partner up with the Small Business Administration to invest in small businesses with equity or debt.

These SBICs are independently owned and managed companies that the Small Business Administration licenses, regulates, and provides funding to. So while the SBA does provide the money, your business won’t actually be giving any equity to the government.

The SBIC program is fairly complicated, but generally speaking, it’s oriented more towards mature businesses with long and successful track records. While plenty of small businesses do qualify for SBIC loans and investments, larger companies also tend to attract this funding.

Here are a few examples of businesses that have secured SBIC funding:

  • Costco
  • Apple
  • Intel
  • Sun Microsystems
  • Staples
  • AOL
  • FedEx
  • Outback Steakhouse

If you think you could benefit from an SBIC loan or equity investment, take a look at the Small Business Administration’s guide to applying. Essentially, you’ll need to put time and energy into meeting the right people and presenting your business plan to fund managers of the appropriate SBICs.

(And if you’re not sure whether debt or equity is the way to go, read this.)

The Small Business Administration: Small Business Grants

Grants are basically free money, right? Who wouldn’t want a grant for their small business?

Unfortunately, the Small Business Administration doesn’t offer general business grants, since it’s a federal agency beholden to the taxpayers.

(Think about it this way: would you want your taxes going towards small businesses across the country that you’ll never hear of or benefit from? Probably not.)

However, the Small Business Administration is connected to two important government programs that can offer you substantial grant money—if your small business involves scientific or technological research and development. These two programs are called the Small Business Innovation Research Program (SBIR) and the Small Business Technology Transfer Program (STTR) and, together, they’ve contributed tens of billions of dollars to small businesses across the country.

Worth taking a closer look? Absolutely.

What Are the SBIR & STTR Programs?

The point behind the SBIR and STTR programs (run by the Small Business Administration’s Office of Innovation) is to foster technological innovation that has commercial potential.

In other words, if your small business is developing some new kind of technology or aiming to make a big scientific breakthrough that other people want, need, and will pay for, then you have a shot at getting an SBIR or STTR grant.

And one of those grants could make a huge difference. Businesses that qualify for the first phase of the SBIR program (explained in-depth here) can get $150,000 over 6 months. With no repayments needed or equity lost. If you move on to the second phase, you could receive $1 million or more, and phase 3 involves lucrative government contracts.

Sound good?

Here’s the caveat:

Very few small businesses actually qualify for grants like these. If you’re looking for money to start a bakery or open a second restaurant location, the Small Business Administration can offer you a loan—but not a grant.

However, if you do fit into the category of science R&D with commercial potential, then you need to take a look at these two SBA programs. They could be the big push you need.

The Small Business Administration: Government Contracts

The United States government is the largest customer in the world, purchasing goods and services of all shapes and sizes each year. You’d be hard-pressed to find a longer and more diverse shopping list from any other institution.

Why does that matter to you?

It’s simple: since the government has a pretty vested interest in keeping small business alive and well, most federal agencies set some of their budget aside for small business-specific purchases. That represents around $400 billion each year. Although it can be pretty persnickety, the government represents a great contracting opportunity for any small business lucky enough to get chosen.

Could you benefit from a large, dependable project from the government?

If you run a business that deals with contracts, then the answer is probably “Absolutely!” The Small Business Administration plays 3 different roles when it comes to government contracts.

1. Ensuring Contracts

The Small Business Administration’s Office of Government Contracting & Business Development makes sure that at least 23% of dollars the government spends on contracts get sent to small businesses instead of their bigger competition.

It also helps the government’s departments grant contracts to:

If you fall into one of those categories, make sure to take advantage of the benefits you receive!

2. Small Business Administration-Guaranteed Surety Bonds

A surety bond is a promise between a contractor and a contractee that their agreed-upon project will be completed. To get this surety bond, contractors go to surety companies, who promise to either find a replacement contractor or front the costs of the project in case the contractor fails.

In other words, a surety bond is a sort of insurance for the project owner. You don’t want construction on your new building stopped because your contractor ran out of money, right? So you’d insist on having a surety bond for the project and rest easy, knowing that one way or another, your project will be completed.

That brings us to the Small Business Administration. Much like how the SBA guarantees loans made by banks, it also guarantees surety bonds made by surety companies for small business contractors.

This makes it easier for small business contractors to get surety bonds—and for them to secure those government contracts, which require surety bonds. You’ll need to apply for the surety bond yourself, but check with the Small Business Administration to make sure they’ve got you covered first.

This all might sound a little convoluted, but it’s actually an incredibly useful service rendered by the Small Business Administration. If you intend to secure government contracts, guaranteed surety bonds can make a big difference to your eligibility.

3. Counseling Services

Finally, the Small Business Administration offers the 8(a) Business Development Program. If your business is run by peoples who the government considers socially or socioeconomically “disadvantaged,” then you could qualify for SBA counseling and assistance with government contracting opportunities.

These programs can last for years and lead to sole multi-million dollar contracts, as well as team bidding opportunities and a mentor-protégé program with other disadvantaged businesses.

If you think your business could qualify for and benefit from such a program, don’t hesitate to research further. The Small Business Administration wants to even the playing field for you.

Here’s How to Get a Government Contract with the Small Business Administration

The process for registering itself is fairly simple, and the Small Business Administration can walk you through each step.

You’ll need to…

  1. Get a D-U-N-S number from Dun & Bradstreet.
  2. Register your Business with the System of Award Management (SAM), a government database.
  3. Find your North American Industry Classification System code (NAICS).
  4. Allow Dun & Bradstreet to audit your past performance as a contractor.

And that’s it!

Once you’re registered, take a look at the Small Business Administration’s list of contract search programs to find the opportunities you should apply for, and hope for the best. Sooner or later, you might score a great opportunity for your small business.

The Small Business Administration: Networking & Local Assistance

Last but certainly not least, the Small Business Administration will help you grow your network.

As a small business owner, you’re never done learning. That’s what being an entrepreneur is all about. And what’s a better way to learn than from other small business owners? They’ve been in your shoes, tackled your problems, and sold to your customers. Their tips and advice could push your business to the next level.

That’s why you should take advantage of all the networking and local assistance opportunities that the Small Business Administration offers. To start with, check their map for your local…

Whether you’re looking for online or in-person business skill workshops, mentorship opportunities, business consulting and training, market research help, informative newsletters, or some other kind of assistance, check one of these local centers.

Plus, the Small Business Administration can hook you up to resource partners (like Certified Development Companies, which help fund their CDC/504 loan program) and local events (like their “Tax Season Survival Guide” class) on the same map.

Find events, a mentor, and other small business owners. Take courses, register your business, and get the right licenses and permits. Make connections. Learn. The Small Business Administration offers you the chance to do all that and more—just check your local offices and centers!

That’s the Small Business Administration!

From small business loans and contracting opportunities to grants, courses, advice, and networking opportunities, the Small Business Administration does it all. Whether you need money, work, or words of wisdom, make sure to check out www.sba.gov and see how you can benefit.

Let us know about your experiences with the Small Business Administration in the comments below, and check out our in-depth analysis of SBA loans if you want to learn more!

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Ben Rashkovich

Ben Rashkovich

Content Strategy Manager at Fundera
Ben is the resident wordsmith and grammar guru at Fundera. He makes sure their top-notch content stays accessible, interesting, and useful for small business owners. Previously, Ben wrote for the Columbia Spectator and eBay's curatorial team.
Ben Rashkovich

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