Launching a small business is an exciting—and daunting—endeavor! One of the most crucial aspects of any new business enterprise is to acquire sufficient funding. Our recent article, The fundamentals of small business funding, covered many of the basics already, so now let’s explore a few specifics so you can determine which options might suit your needs!
1. Current SBA loan offers
The SBA 7(a) loan is the Small Business Administration’s “most popular product,” writes NerdWallet. It offers a “flexible sum of cash for a variety of uses, including managing daily operations, purchasing new products, and refinancing high-interest loans.” If that sounds right up your alley, read on!
The SBA establishes the general loan process guidelines. It backs the loans which are given out by third-party lenders who must follow SBA rules. This allows lenders to offer loans with “less stringent credit standards and lower down payments than conventional loans,” says Bank of America.
There are several types of SBA 7(a) loans, but the most common are the:
- Standard 7(a) – Maximum loan amount of $5 million. Credit decisions made by the SBA
- 7(a) Small Loan – Maximum loan amount of $350,000. Credit decisions made by the SBA
- SBA Express – Maximum loan amount of $500,000. Faster review process; credit decisions made by the lender
SBA.gov lists the current interest rates for variable and fixed-rate loans.
SBA 7(a) variable rate loan interest rates (as of Aug 1, 2023)
|SBA loan size||Max rate if maturity is less than 7 years||Max rate if maturity is more than 7 years|
|$25,000 or less||Base rate plus 4.25%||Base rate plus 4.75%|
|$25,001 to $50,000||Base rate plus 3.25%||Base rate plus 3.75%|
|More than $50,000||Base rate plus 2.25%||Base rate plus 2.75%|
SBA 7(a) fixed rate loan interest rates (as of Aug 1, 2023)
|Loan amount||Prime rate in effect on the first business day of the month, plus|
|$25,000 or less||6.0% (600 basis points) plus the 2.0% (200 basis points) permitted by 13 CFR 120.215|
|$25,000 to $50,000||6.0% (600 basis points) plus the 1.0% (100 basis points) permitted by 13 CFR 120.215|
|$50,000 to $250,000||6.0% (600 basis points)|
|$250,000 or more||5.0% (500 basis points)|
2. Grants for different industries
Grants are a popular funding option because they don’t have to be paid back! As Investopedia explains, “A small-business grant is an award, usually financial, given by one entity (typically a company, foundation, or government) to a company to facilitate a goal or incentivize performance.”
Grants do, however, come with strings. Obtaining a grant typically involves going through a three-stage process—a (sometimes time-consuming) pre-award phase; the award issuance; and a post-award phase (which may feature stringent follow-up requirements, such as reports or audits, to ensure compliance with terms).
Grant types include the following:
- Government grants – Given at the local, state, or federal level and designed for highly-specific purposes. Check out Grants.gov for information about federal grants!
- Corporate grants – Given by businesses in support of the awardee’s organizational goals.
- Foundation grants – Given by private foundations who want to support like-minded businesses.
- Nonprofit grants – Given by nonprofits to small businesses offering community-enriching goods or services.
- Individual grants – Given by philanthropists based on their personal desires to support a cause.
3. Resources for women, POC, veterans, and people with disabilities
Included within the above types of grants, one can find a wide range of grants designed to assist specific small business owner groups, such as women, people of color, military veterans, and persons with disabilities. Below are just a handful of the opportunities available!
- Women’s Business Enterprise National Council – The WBENC offers a selection of grants and other financial assistance to women-owned businesses in need, such as the Collegiate Women of Color Grant.
- Minority Business Development Agency – The “only federal agency solely dedicated to the growth and global competitiveness of minority business enterprises.”
- SCORE – SCORE offers insights and mentorship to entrepreneurs of color on how to acquire small business grants.
- Veterans Resources – Resources include the VA Small and Veteran Business Programs, the VA Office of Small and Disadvantaged Business Utilization, and the SBA Veterans Business Development program. Private resources include the Second Service Foundation and Warrior Rising.
- State Resources for Persons with Disabilities – Grants.gov lists hundreds of federal grant opportunities, including for businesses owned by persons with disabilities.
4. VC funding groups and resources
Interested in gaining funding via a venture capital (VC) organization, or just want to learn more about how VC works? Below are a handful of popular options out there to explore!
- 500 Global – Invests in early-stage startups. Or as they put it, “We invest in the world’s potential!”
- Accel Partners – Invests in early-stage/growth-stage tech companies.
- Angel Capital Association – Trade association for angel investors.
- AngelList – Connects startups with VCs and angel investors.
- CBInsights – Offers insights into VC industry trends.
- Kauffman Fellows – Provides training and support to early-stage companies.
- National Venture Capital Association – VC trade association that’s “Empowering the next generation to fuel the economy of tomorrow.”
- PitchBook – Offers insights into VC industry trends.
Sequoia Capital – Invests in early-stage/growth-stage tech startups and helps “the daring build legendary companies.”
- VentureSource – Offers insights into the world of VC, angel investing, and startup funding.
There are resources out there for every small business!
Funding a small business doesn’t have to be a hassle. In fact, with the right resources, it’s a relatively straightforward process. The trick is deciding which options you want to pursue based on your business goals.
Know some great resources we missed? Share them with our Ruby social community!