Jobs may be increasingly hard to find in this economy but, if you’ve always dreamed of working for yourself, now may be the perfect time to think about starting your own business.
In addition to announcing recent incentives to get credit moving, the Obama administration's American Reinvestment and Recovery Act includes a $375 million dollar pot that will lower lender risk and make it easier for would-be entrepreneurs to fund their dreams.
“Small business loans are guaranteed by the SBA to the tune of 85% for loans up to $150,000 and up to 75% for $2 million,” says U.S. Small Business Administration spokesperson, David Hall. “When the provisions on the act are implemented, the SBA will have the ability to raise that guarantee to 90%.”
Who Benefits from Uncle Sam's Backing
While the new loan guarantee is geared toward making it easier for small business owners to get credit, the lenders are also winners.
The federal government will make sure that institutions who lend money to small businesses for land, equipment or other capital incur little risk if the borrower defaults on the loan. So, the bank gets a return of up to 90% on its investment.However, once the loan becomes the property of the federal government, defaulting business owners won’t get a break from the SBA.
“Once the loan is in default and the SBA pays the lending institution, we will exhaust all reasonable means to collect on the debt,” says Hall. “Including [seizing] real estate assets belonging to the business and any personal property used as collateral to get to loan.”
How to Prepare to Apply for Your SBA Loan
Hall says the details of the plan will be available from his agency “very soon,”
In the meantime, if you’re interested in tapping the government in order to fund your small business, here are some helpful hints you can use to get a loan: