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If you are an entrepreneur, you are most likely familiar with the Small Business Administration (SBA). This United States government agency is well-known among business owners in countless industries nationwide, many of whom have looked to the SBA for growth capital, consulting services, federal contracting jobs, and other business-related services.
So, what is the SBA, how did it start, and how does it help small business owners? In this Balboa Capital blog article, we provide answers to those questions. We also feature interesting facts and information about the Small Business Administration that you might not be familiar with.
What is the Small Business Administration?
As we mentioned at the beginning of this blog article, the SBA is an independent agency of the U.S. government that helps small businesses grow and succeed, which ultimately benefits small towns, big cities, and our nation’s economy. When businesses thrive, they bring jobs, revenue, and tax dollars to the communities in which they operate.
The SBA provides a range of services to startups and established businesses. These include business loans, business counseling, startup assistance, and mentor programs from other entrepreneurs. In addition, there are programs for veteran-owned businesses, minority-owned businesses, women-owned businesses, and disabled entrepreneurs.
The SBA website has a wealth of helpful information and tools, too. You can peruse the site and learn how to plan, launch, manage, fund, and grow your business.
When did the SBA start?
The Small Business Administration website has a wealth of information about the SBA. For starters, the SBA was established on July 30, 1953, when the Small Business Act was signed into law by President Dwight D. Eisenhower. Congress created the SBA as an independent agency of the U.S. government. Its longstanding mission is to “aid, counsel, assist and protect the interests of small businesses, to preserve free enterprise, and to maintain and strengthen the economy.”
Today, the SBA has offices all over the United States, and there is at least one office in each state. The Small Business Administration provides services to over one million business owners annually. Small business owners can visit an SBA office in person or access the SBA website for assistance with just about everything related to owning a business.
How does the SBA categorize businesses?
The Small Business Administration determines which companies fall into the “small business” category based on several factors. If you own a small business that meets these requirements, you can take advantage of the SBA’s benefits and opportunities. First, small companies are classified with a unique code based on their industry. We are referring to the North American Industry Classification System (NAICS), which the SBA and other Federal agencies use to classify businesses. There are codes for all types of industries, and they are available on the NAICS website.
To get a valid NAICS code, you must contact the U.S. Census Bureau or have a third party request a code on your behalf. The Census Bureau assigns one code to each business based on its main activity/source of revenue. For example, a bookstore that has a small espresso bar will not be classified as a coffee shop because its primary business is selling books. So, it will be classified as a bookstore with a NAICS code of 459210.
Next, the SBA defines a small business as one that operates for profit, is physically located in the United States or one of its territories, is independently owned, and is set up as either a corporation, partnership, or sole proprietorship. The SBA also has specific requirements for the number of employees and the total income (gross income plus the cost of goods sold) that a business has. The size standards can be found on the SBA website.
What is an SBA loan?
Loans are what most entrepreneurs associate with the SBA. The SBA loan programs have been well-known among the business community for decades. They are frequently mentioned in the media and by government officials and financial analysts. So, when business owners need capital to start a new business or fund an existing one, an SBA loan is often their first choice.
The Small Business Administration does not provide funding to business owners. The loans are provided by SBA-approved banks, credit unions, and other lenders, subject to the requirements set forth by the SBA.
There are SBA loans available for businesses at every stage. The 7(a) loan and the 504/CDC loan are two of the most popular options. The 7(a) loan program is recommended for business owners who need working capital to purchase an existing business, refinance debt, or buy equipment, furniture, and inventory. The loan amounts usually range between $125,000 and $5 million, and the repayment periods are 5 to 25 years.
The 504/CDC loan program is designed for long-term financing needs. These may include business-related purchases such as real estate, capital equipment, technology, machinery, and business expansion initiatives. A 504 loan cannot be used for working capital, inventory, real estate rental, or consolidating or refinancing debt.
Some other SBA loan programs available include SBA Express, Export Express, Export Working Capital, Veterans Advantage, and CAPLines. If you don’t know which type of loan is best for your specific needs, or if you need more information, you can visit the SBA website or contact your bank or lender.
What about government contracting?
The SBA Office of Government Contracting (GC) works with federal departments and agencies throughout the country to award jobs. The GC ensures that women-owned businesses, service-disabled veteran-owned businesses, and small disadvantaged businesses receive a certain percentage of government contract jobs.
Business owners interested in government contracting can visit the Association of Procurement Technical Assistance Center (APTAC) online. The APTAC website has helpful information about government contracting and how to qualify to sell products and services to local, state, and federal governments.
The SBA has come a long way since its inception. It is a preferred resource for entrepreneurs who need access to growth capital, contracting programs, and financial assistance following unexpected weather events and natural disasters. The SBA also provides a range of services to help the small business community, including in-person training programs for startups, business expansion, and day-to-day operational management.
Balboa Capital, a Division of Ameris Bank, is not affiliated with nor endorses the Small Business Administration, North American Industry Classification System, or Association of Procurement Technical Assistance Center. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.