What is the Purpose of the Small Business Administration?

May 6, 2015 

Dear Cathy:

I am finally ready to start a business.  What is the true purpose of the Small Business Administration? Future Business Owner, Alabama

Dear Future Business Owner:

The Small Business Administration (SBA), http://www.SBA.gov was mandated by Congress to help finance small businesses.  But remember the Small Business Administration is “Uncle Sam” or the “Federal Government.” 

If you have a one person business, you are self-employed.  If you have a few employees you have a micro-business.  Unless you have a significant number of employees, the SBA does not even recognize you as a small business.

Their chapters provide advice on how to start and expand a business; Development of a business plan; how to promote a product or service, etc.

They provide loans, however, the SBA doesn’t lend money directly to you, instead, the SBA is a guarantor of loans made by private and other institutions. 

SBA general lending criteria includes:

1) outstanding credit history (FICO/Credit Score of over 700)

2) cash flow adequate to service the debt

3) they look at your collateral

4) they look at your equity

5) they look at character

6) they look at your experience

For a complete guide on the steps to take to set up a successful business read “How To Take Control of Your Own Life: A Self-Help Guide to Starting Your Own Business” – available as an e-book and paperback.