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Where can those looking to start a small business go for help?

It is a truly exciting time when a group of budding entrepreneurs come together to share ideas, develop a business plan and lay the foundation for what they hope will someday be a successful venture. Indeed, things become even more exciting when these entrepreneurs put their business plan into action and start trying to turn a profit in earnest.

What happens, however, when this new business hits a roadblock in the form of having insufficient capital? Do they have to keep spending from their own already limited pool of resources, or borrow from family and friends?

One solution to this conundrum is, of course, securing a loan. In fact, many businesses in this situation may be able to secure what is known as a 7(a) loan from the U.S. Small Business Administration.

What is the U.S. Small Business Administration?

While the SBA doesn't have the name recognition of other federal agencies, it nevertheless plays a vital role in our economy. Created back in 1953, its stated mission is to help "Americans start, build and grow businesses." One of the ways in which it accomplishes this goal is by offering small business owners access to much-needed resources via grants and lending like the 7(a) loan program.

What is the 7(a) loan program?

The 7(a) loan program is by far the most popular loan program offered by the SBA, helping entrepreneurs across the country subsidize a host of business objectives.  

What types of small businesses are eligible for the 7(a) programs?

While the SBA stops short of outlining what types of small businesses are eligible for the 7(a) program, it does set forth some baseline requirements that all applicants must satisfy in order to be considered.   

Some of these factors include:

  • Operating as a for-profit organization
  • Meeting size requirements established by the SBA
  • Conducting business in or proposing to conduct business in the U.S.
  • Being current on any outstanding debt obligations to the federal government
  • Investing money into the business prior to seeking financial assistance
  • Possessing reasonable invested equity

We will continue discussing this topic in future posts. In the meantime, those entrepreneurs in need of assistance with any sort of business formation matter from business entity selection to drafting of employment contracts should strongly consider speaking with an experienced legal professional. 

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Robert Kaufman has been selected as a 2013 Top Rated Lawyer in ‘Commercial Litigation’ as will be published in the May issue of The American Lawyer & Corporate Counsel magazine.Alex Kaufman has been selected as a 2013 Top Rated Lawyer in ‘Commercial Litigation’ as will be published in the December issue of The American Lawyer & Corporate Counsel magazine.

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