Businesses like pizzerias and doctor’s offices are an essential part of each community, and provide necessary products and services. Small businesses are the lifeblood of the economy, but to their owners it can all feel like just one long struggle. Cash flow is a problem that many small businesses face, whether they’re starting out or looking to expand or upgrade their facilities and equipment. Many lenders, banks, and financial institutions recognize their special needs and problems, and make it easier for small businesses to get the loans they need to succeed.
Why small businesses are necessary
Small businesses are an essential part of the landscape of our lives. Whether we live in rural areas, small towns, or big cities, we all rely on the nearby grocery store, the pizza shop, and the auto body, as well as the local doctors and dentists offices. All of these provide essential products and services that most people take for granted, but would be completely lost without.
According to the U.S. Small Business Association (SBA), there are a total of 28.8 million small businesses in the country. The official definition of a small business is an enterprise that employs less than 500 people. But size is not an indication of their importance. In fact, they not only provide necessary products and services to local communities, they also act as important local employers. Nationwide, they account for 56.8 million jobs.
How can small businesses succeed?
All of this means that small businesses are an important part of the economic picture. But life is far from easy for small business owners. Especially for new businesses, the risk of failure is high. It is estimated that of all new businesses, only one out of three will last out ten years. One of the most significant problems small business owners face is cash flow. It’s a leading factor in the failure of business ventures, accounting for 82% of failed enterprises.
The SBA partners with many banks, financial institutions, and lenders to help small businesses get loans which will provide the cash needed for their operations. Small business loans are typically small. For example, the average value of a Small Business Association 7(a) in 2015 was $371,628. Small business loans can be used to upgrade facilities and equipment, to expand operations and to hire new staff.
How do SBA loans work?
The SBA does not make loans itself but matches up businesses with lenders like community development organizations, and micro-lending institutions. SBA loans have a number of favorable features for both small businesses and lenders. By guaranteeing the loans for qualified businesses, the SBA also reduces the risk for lenders. The SBA also has some special programs for women business owners.
For small businesses, SBA loans come with lower down payments, no collateral requirements for some loans and flexible overhead requirements.
The SBA also offers small business owners education and counseling. This can provide crucial support to help owners to start and run their businesses successfully.
Small businesses are an important part of our lives, but face a number of problems. Cash flow is a problem that they face at every stage of their existence. SBA loans can help small business owners to start and run their businesses successfully. The SBA also provides education and counseling for business owners.