Takeaways
- The SBA provides small businesses funding, resources, and counseling.
- The SBA was established in 1953 to promote economic growth by aiding entrepreneurs.
- The SBA loan programs like the 7(a) Loan, CDC/504, and Microloan programs.
- The SBA has resources like the Small Business Development Center and SCORE program.
- The SBA offers financing initiatives for historically underserved communities.
What Is the Small Business Administration?
The U.S. Small Business Administration (SBA) is a government agency that supports entrepreneurs and small business owners. The SBA was established in 1953 and provides small businesses counseling, capital, and contracting expertise. Its mission is to promote economic growth and prosperity by supporting Americans to start, build, and grow their businesses. [1]
The SBA plays a crucial role in fostering economic development by offering programs and services that assist small business owners in overcoming challenges and achieving success. The SBA has sprawling resources throughout the U.S., with offices in every state. [2]
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History of the SBA
The SBA was created on July 30, 1953, when President Dwight D. Eisenhower signed the Small Business Act into law. The primary goal was to aid, counsel, assist, and protect the interests of small business concerns. Initially, the agency focused on providing loans and guaranteeing bank loans to small businesses. Over time, the SBA expanded its scope to include disaster recovery assistance, business counseling, and government contracting programs.
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During its early years, the SBA's impact was vital to helping small businesses recover from the effects of World War II and promoting economic growth. The agency became even more critical during economic downturns, like the 2008 financial crisis, when it provided essential support to struggling businesses. Studies have shown that SBA loan guarantees have significantly contributed to small businesses' survival and growth during economic crises.[3]
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To aid small businesses even further, the SBA has evolved to meet the dynamic changing needs of the U.S. economy. The agency's programs have expanded to include initiatives for underserved communities, including women, minorities, and veterans. For example, the SBA's Women’s Business Centers and Veterans Business Outreach Centers provide targeted support to these groups, helping them overcome specific challenges and access resources tailored to their needs. [4][5]
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SBA Loan Programs
The SBA Loan Program is one of the most valuable services offered by the agency. It includes several types of business loans designed to meet the diverse needs of small businesses. Here are three popular lending programs:
- 7(a) Loan Program: The most popular is the 7(a) loan program, which provides financial support for businesses that meet special requirements. This can include everything from short- and long-term working capital, purchasing equipment, and buying real estate.
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According to a report by the Congressional Research Service, the 7(a) program is the SBA's most expansive financing program, accounting for nearly $25 billion in lending in 2018 alone.[6]
- CDC/504 Loan Program: Another essential loan program is the CDC/504 Loan Program, which provides long-term, fixed-rate financing for major assets such as land and buildings. These loans can be utilized for both expansion and modernization.
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The CDC/504 program involves a unique structure where loans are funded by a combination of a private-sector lender, a Certified Development Company (CDC), and a contribution from the borrower. This structure allows businesses to obtain financing with a lower down payment and longer terms.
- Microloan Program: The Microloan Program, on the other hand, offers small, short-term loans to small businesses and specific non-profit childcare centers. This program is specifically aimed at businesses needing smaller amounts of capital.
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Microloans can be used for working capital, inventory, supplies, furniture, fixtures, machinery, and equipment. The program also requires technical assistance, ensuring that borrowers receive training and support to help them succeed.
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How the SBA Helps Businesses Get Started
Starting your own business can be very challenging, from figuring out market sizing, technology optimization, and how to raise capital. The SBA offers many resources to help you navigate these hurdles. Here are some helpful resources:
- Small Business Development Centers: One of the primary ways the SBA assists new businesses is through its extensive network of Small Business Development Centers (SBDCs). These centers provide free, confidential business counseling, training workshops, and management assistance. You can receive guidance on business plans, market research, and financial projections.
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- SCORE Program: The SBA's SCORE program, a non-profit association of volunteer business counselors, provides mentorship and educational workshops. SCORE mentors offer expertise across various industries and help new business owners make informed decisions. This mentorship can be invaluable in assisting entrepreneurs in avoiding common pitfalls and developing effective growth strategies.
- 8(a) Business Development Program: The SBA also plays a crucial role in assisting small businesses gain access to government contracts through its 8(a) Business Development Program. This program helps small, disadvantaged companies compete in the marketplace by providing business development support and facilitating access to federal contracting opportunities. The program includes a mentorship component, where more experienced companies guide 8(a) firms through the complexities of the contracting process.
- Business Network: The SBA collaborates with other organizations to extend its reach and impact. Partnerships with local chambers of commerce, trade associations, and community organizations help the SBA connect with a broader audience and provide more comprehensive support to small businesses. These collaborations enable the SBA to offer more localized and industry-specific assistance, ensuring that entrepreneurs receive relevant and practical guidance.
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Smart Summary
The Small Business Administration is an incredibly valuable store of resources and an ally for entrepreneurs and small business owners. The SBA could be an invaluable resource if you are starting your own business. With a rich history of supporting economic growth and resilience, it provides essential services such as loan programs, business counseling, and access to government contracts. By understanding and utilizing the resources offered by the SBA, you can secure funding, launch your business, and grow your business. The SBA’s commitment to fostering small business success continues to play a vital role in the entrepreneurial ecosystem.
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(1) SBA.gov. Celebrating 70 years of service to America’s small businesses. Last Accessed January 14, 2025.
(2) SBA.gov. SBA District Offices. Last Accessed January 14, 2025.
(3) Federal Reserve Bank of Cleveland. Small Firm Credit Markets, SBA-Guaranteed Lending, and Economic Performance in Low-Income Areas. Last Accessed January 14, 2025.
(4) SBA.gov. Women’s Business Center. Last Accessed January 14, 2025.
(5) SBA.gov. Veteran’s Business Outreach Center Program. Last Accessed January 14, 2025.
(6) Congressional Research Service. Small Business Administration 7(a) Loan Guaranty Program. Last Accessed January 14, 2025.
