Federal Aid for Small Business – Why Will Any Government Help?
Unemployment was a huge problem until the US government realized that small businesses or entrepreneurship can help not only a single person but also several other unemployed and the government itself!
When an entrepreneur starts a business, she/he has to employ many others, thereby reducing the problem of employment. The small business also pays taxes on its activities (including income taxes among other taxes encountered during the normal course of business). These taxes contribute to the nation’s overall GDP. This helps the government with money for the benefit of the nation.
This led the US government to help aspiring entrepreneurs start and run their small businesses. As mentioned earlier, the federal help to small businesses comes back to the government in form of increased GDP and reduced unemployment. The small businesses employ over 50 per cent of the total workforce of the nation besides contributing a significant amount to the government’s treasury.
The following sections offer a discussion on the federal aids for small business. We will NOT cover the normal systems (banks and private money lenders) offering bigger business loans to businesspeople having good credit and ample resources.
Image Credit: Wikimedia Commons/United States Department of Veteran Affairs
Federal Aid for Small Business – Counseling Facility for Starting Small Business
Please note that the US Federal Government does not directly finance any small business. Still, there are two major federal aids for small business that are really helpful in starting and controlling small business. These federal aids for small business are counseling and helping the entrepreneur arrange finance for the business from different agencies.
The counseling is offered in terms of planning the business, controlling the business, and other aspects of the business based on its nature. They guide you to the different sources that offer grants and loans for small business. They also give details on utilizing such grants to improve your business. Thus, though there is NO DIRECT financial help from the US Federal Government, it does help small businesses by way of setting up agencies that finance small businesses.
In short, the federal small business counseling agencies help you with strengthening your business plan, helping you with creating backup plans in case of disasters, directing you to other agencies that help you financially, and finally, helping you with tax plans that offer reduction (or even exemption) on certain businesses. You also get help on securing your business and related infrastructure through state-sponsored insurance companies.
Image Credit: Wikimedia Commons/United States Government.
Federal Aid for Small Business – Small Business Administration (SBA) and other Agencies
The most popular agency to which you will be directed for finance is the Small Business Administration, (SBA). The SBA too offers help with sharpening your business plans while offering advice related from planning to implementing to controlling your business while also offering guidance on utilizing different grants available. If required, you can also avail necessary training through the SBA. The only problem when approaching the SBA is that they help only sole proprietary businesses. If you wish to start a venture under partnership, SBA won’t be able to help you. For more information on SBA, visit their website.
The SBA is supported by the Federal Government as well as by several banks and private money lenders. Based on the nature, needs, and economic status of an individual, the SBA has several programs to support small businesses. An entrepreneur can get up to $150,000 for starting a business. SBA has a special program for women entrepreneurs. This program offers up to $250,000 for an existing business, controlled by women entrepreneurs.
Among other federal aids for small business is the Small Business Service (SBS). This program caters to people who are not able to produce any collateral and hence, cannot get loans anywhere else for starting their business. However, the business plan has to be very stable for the loan to be approved at SBS. One cannot approach directly SBS that offers unsecured loans up to $250,000. If you wish to avail this loan, you need to contact an authorized lender who will guide you through the process.
Besides the above two government agencies, there are several other agencies that help in funding your small business. In addition, the new Obama government is injecting another $15 billion to support the small businesses as per the “New York Times”, dated March 16, 2009.
Even with so many federal aids for small business, there is still a significant percent of unemployment in the US. Is the government’s help not sufficient? The section offers a take on the issue.
Image Credit: Wikimedia Commons/US Government.
Federal Aid for Small Business – Is Government Help Enough for Small Businesses?
Though the federal aids for small business are not available directly, the US government has made sure that there are ample agencies to help aspiring entrepreneurs as well as existing small businesses. These agencies offer both grants and loans – secured and unsecured. Still, people complain of inadequate government help for small businesses.
The major reason behind this tendency is the lack of knowledge of the available federal aids. Most people start without proper research and land up in the hands of agents who misuse the ignorance factor. It is necessary for any entrepreneur to take their own time and check out all the resources before zeroing in on any decision, as the decision IS BOUND TO HAVE have long term implications - both in the life and business of the entrepreneur.
The US Federal Government has several counseling agencies in place that are not used by the aspirants who want to get their business rolling as soon as possible. The conclusion I reach after studying the many federal aids is that though there is proper federal support for small businesses in the US, the government failed in educating people about these aids. This leads aspiring entrepreneurs into the trap of malicious loan agents who are more into making money (for their own benefits) out of the grants and federal aids for small business rather than offering directions to the business aspirants.
Source: Small Business Administration - https://www.sba.gov
This post is part of the series: Entrepreneurs Tips for Success
This article series offers you some reading material that helps you understand that you do not need a B-School degree to make it big. The series covers few entrepreneurs who made it big without sophisticated business strategies. It also covers the American Dream and grants available for the same.
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- Dealing with Unemployment - Federal Aid for Small Business