Federal Business Loan

By: EconomyWatch Content   Date: 23 December 2009

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Federal business loans are granted to small businesses and startups that meet the standards established by the Small Business Administration (SBA). Typically, a federal business loan is extended to a business owner through a commercial lender, with a 100% backing by the federal government. This guarantee implies that in case the borrower (business owner) defaults on the loan payments, the federal government will take full responsibility of meeting the repayments.

Federal Business Loan: History

Federal business loans are governed by the SBA, which was established on July 30, 1953 under the leadership of President Dwight Eisenhower. It serves as an extension or modification of the Reconstruction Finance Corporation (RFC). The RFC, founded in 1932 by President Herbert Hoover, aimed at supporting domestic businesses struggling to keep their business afloat due to the Great Depression.

 

The SBA, besides offering loans, provides loan guarantees, counseling and other assistance to small business owners in the US. Federal business loans are basically intended for spurring economic growth; often extended to emancipate minority groups.

 

Federal Business Loan for Women

 

The Small Business Administration has created a separate program, known as the 8 (a) certification for funding women owned business. To qualify for a federal 8 (a) certification program, a business must have at least 51% of the ownership and management under women.

 

Federal business loans for women cover multiple business operations, from purchasing working capital and equipment to organizing advertising and marketing campaigns.

 

These loans are supported by several organizations, such as:

  • The National Women's Business Council (NWBC)

  • The National Association of Women Business Owners (NAWBO)

  • The American Association of Women Business Owners

Federal Business Loan for Special Circumstances

The US Federal Government extends special loans for small business and private, non-profit organizations struggling to recover from a sizeable disaster, which may be economic or physical:

 

·        Economic Injury Disaster Loan: This loan is extended when an organization has suffered significant economic injury, and is located in a disaster area confirmed by the SBA. The interest rate is less than 4 percent per annum.

·        Business Physical Disaster Loan: This loan is intended for an organization that has suffered severe physical damage due to a natural disaster, such as a hurricane or an earthquake. The maturity period depends on the financial capacity of this business.

 

The maximum loan amount under both disaster federal government loans is $2.0 million, with a maximum maturity period spanning 30 years.


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