Most entrepreneurs know the U.S. Small Business Administration (SBA) as a trove of information and a guide to countless resources that help get shops, professional services providers, and technology startups off the ground. While bookmarking the SBA.gov website certainly isn’t required, you’d be crazy not to do so.
In addition to dispensing helpful advice—from putting together a business plan to navigating tricky legal and regulatory waters—the SBA participates in various loan programs that help small companies get the funding they need to move to the next stage of their growth. The problem, according to Evan Singer, general manager of SmartBiz, is that until recently, securing a low-interest SBA-backed loan was a challenge.
Fortunately, modern technology has come to the rescue. SmartBiz is “an online marketplace for SBA loans,” Singer told Small Business Computing. “We make it easier for banks to originate SBA loans.”
His company provides the underwriting and originating software that lets more banks participate in SBA loan programs. That fosters competition and choice in the market while making it easier and more affordable for small business owners to get the funding they need. “It’s almost like TurboTaxing the SBA loan process,” Singer said.
SmartBiz specializes in loans of up to $350,000 with payback terms of up to 10 years. With interest rates in the 6 to 7 percent range, most small businesses can easily afford the monthly payments, said Singer. And that brings us to the first reason why savvy small businesses owners love the SBA.
5 Ways the Small Business Administration Helps SMBs
1. SBA Loans Are a Better Deal
Many small businesses owners should begin and end their loan search at the SBA.
“The SBA offers much better loans than many of the alternative lenders in the market,” Singer said, referring to the new crop of online lenders serving small businesses. Alternative lenders routinely lock applicants into a three-year term with interest rates in the mid-teens, he said.
For a $100,000 loan, that can amount to payments of $5,000 to $6,000 per month, or even $10,000 to $12,000 for some unlucky applicants. On the other hand, a 10-year, low-interest (6 percent) SBA loan costs $1,100 per month.
2. The SBA Helps Banks Say Yes to Financing Small Business
Technology is helping the SBA fulfill its mission.
Singer reminded that the SBA was founded, in part, “to provide a way for banks to offer credit to businesses that normally would not qualify for a traditional bank loan.” Now with better and faster access to SBA-guaranteed loan underwriting and origination technology, banks can say yes to small business owners more often.
3. SBA Boosts Small Business Economy
SBA loans help American businesses to grow, to add jobs, and to strengthen local communities.
By providing a government guarantee to a portion of loans made by banks, the SBA helps to drive the American economy, said Singer. And the numbers don’t lie. Each year, SBA loans amount to more than $20 billion borrowed by 45,000 small businesses that may not have otherwise secured funding.
4. Not a Government Handout
Regardless of one’s views on government assistance, there’s a major reason to love the SBA.
“The SBA does not cost the American tax payers anything,” Singer said, debunking a big misconception about the government agency. “It funds itself with fees that it charges to small businesses,” which covers the SBA’s own costs and loan defaults.
5. Today’s SBA Is Tech-Savvy
It’s time for small business owners to change their attitudes toward the SBA. These days, it acts less like a lumbering, bureaucratic government agency and more like a lean-and-mean tech startup.
“It’s not your parents’ SBA anymore,” Singer assured. By embracing technology, the SBA makes it possible for small business startups to access the resources—financial and otherwise—they need to achieve success.
Pedro Hernandez is a contributing editor at Small Business Computing. Follow him on Twitter @ecoINSITE.
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