The United States of America has the world’s major economy, holding leadership for the last 100 years. The US government develop and support private business maintaining the high level of the economic stability. It is the reliability of the economic system, law constancy and privileged attitude towards business which create the base of the American entrepreneurial spirit. It is for this reason that that the entrepreneurs from all over the world try to develop business in the US today.
The most profitable business spheres in the USA are commercial accounting, legal services, equipment leasing, oil and gas industry, medical services (dental, ambulatory care etc.) and funeral services.
Our State provides a number of affordable programmes to help business start-ups. Such programmes are developed for ecological start-ups, home business, providers, self-employment. There is also a support scheme for Native Americans, veterans and women opening their business.
In 1953 the US Government established the Small Business Administration (the SBA). Since that time the SBA developed in a powerful federal agency, whose leaders are approved by the Senate. Moreover, Bill Clinton equated the status of the SBA head to the status of the cabinet member, thereby equating the agency to the most influential ministries.
Best Business Loans Today
The SBA provides secured business loans for public account. But the most popular and demanded financial product is small business loans against state guarantees. This guaranteed loan are known as Programme №7 – by the corresponding article number in the small business related law.
The mechanism of such loans is quite simple. One of the partnership banks gives an entrepreneur a loan for business start up or for existing business development. The SBA. in turn, guarantees a 90% return if the loan-subscriber overtakes bankruptcy. During the presidency of Barak Obama, the limit of business loans was raised from two to five million dollars.
Of course, not all the companies applying for a business loan will get it. The administration has strict selection principles. The business should exist for at least two years, be profitable in the last 12 months, and earn at least 50 000$. The mentioned rules are dictated by a fully justified foresight. Moreover, the SBA sets the maximum allowable business loan rates.
As of July 2017, interest rates for business loans range from 6 to 9% per annum, depending on the loan value and the loan maturity. Other things being equal, the higher the amount, the lower the rate.
So, with a business term loan of less than 7 years, the maximum rate for a loan of up to 25 000$ will be 8,5%.If the business lending repayment is estimated for more than 7 years, it will reach 9%. If the total is 50 000$ or more, the rate will amount to 6,5%.
There are also capital loans – provided for construction and purchase of industrial premises and equipment (Fixed Asset Financing Program). Such capital funding loans are implemented through a network of certified non-profit companies created to promote economic development in the field (Certified Development Companies – CDC).
Under the terms of the program, the loan debtor takes 10% of all expenses. Another 50% is provided by a bank or other credit institution against a 100% SBA guarantee. The CDC provides the remaining 40% with a state commitment to a full refund. As for July 2017 the rates for this loan type were set at about 4%. And the credit maturity rises up to 25 years.
State Small Business Credit Initiative (SSBCI) is a regional program, implemented under the auspices of the US Treasury. The state authorities select the candidates for small and large business loans in accordance to local conditions and needs. The authorities also determine the amount of interest rates on business loans and guarantee repayment of at least a part of the invested funds to creditors.
The specific loan conditions vary from state to state. In the overwhelming majority of cases the amount does not exceed 80% of the loan amount. The rest is the borrower’s personal risk.
For example, in California the guarantees for business loans are taken by 11 local non-profit Small Business Financial Development Corporations (FDCs). A reserve fund of $26 million has been formed to cover potential risks. Typically guarantees cover 75% of the loan amount, but should not exceed 500 000$ in each case.
Every year 800-100 Californian entrepreneurs get a business loan according to SSBCI program. At the same time, the average amount of guarantees is 250 thousand dollars and the maximum loan period does not exceed 7 years.
How to Apply for a Business Loan
First of all, you should create a profile on the website of SBA and fill it in thoroughly. The main points are:
- Type and location of the company
- Product or service provided
- A brief history of the company
- Information about annual sales, profits, paybacks
- The number of employees
- Competition level
- Potential customers and suppliers
- Experience management
- Further development
It is also necessary to submit a list of real estate objects and assets which can serve as collateral. Business loan application should include data about at least two repayment sources.
SBA may also require financial reporting from all owners, partners, employees and shareholders of the borrowing company. It can also request tax returns for the last years.
It is also necessary to attach the schedule of promissory notes. The more complete the information provided, the more likely you get business loan.
There is no doubt, that it’s rather difficult to straighten out all the rules of getting a business loan. Fortunately, there are special organizations like Unified Capital, providing a wide range of financial services. An experienced team will help you find finance for small business even if the situation seems to be hopeless. The only thing you should do is to fill in the application form on the company’s website and wait for the manager’s call-back. United Capital will simplify the process of funding for small business and will make business loans for bad credit possible.