Alternative Venture Finance: Federal Grants and Loans - Answering Service Resources

Home
>
Loan
>
Alternative Venture Finance: Federal Grants and Loans

Alternative Venture Finance: Federal Grants and Loans

While most companies seeking venture capital initially think about angel investors and venture capitalists, a large alternative source of financing is federal grants and loans. The two largest federal grant programs are run by the Small Business Administration (SBA), and by Small Business Investment Companies (SBICs).

An SBA loan, regardless of whether it is a direct loan from the SBA, or, as is more common, a bank loan guaranteed by the SBA, is essentially a bank loan. The benefit of it versus a traditional bank loan is the rate. SBA rates are typically much less than traditional business loan rates.

In most cases, in a guaranteed SBA bank loan, the SBA guarantees 90 percent of the loan will be repaid to the bank. As such, banks are at much less risk than in most other loans, and are a bit more flexible with regards to who they offer these loans. However, the SBA usually requires the founders of the company to personally guarantee the loans, which makes them risky should the venture collapse.

Alternatively, Small Business Investment Companies (SBICs) are privately organized corporations that are licensed and regulated by the SBA. Small or emerging businesses which qualify for assistance from the SBIC program can receive equity capital and/or long-term loans from these companies. Essentially, these companies provide their own capital, which is supplemented by federal funds, to the companies they fund.

Interestingly, U.S. taxpayers benefit from the SBIC program as tax revenues generated from successful SBIC investments have more than covered the cost of the program. Likewise the program has created hundreds of thousands of jobs.

In summary, SBA and SBIC financing are viable alternatives to financing from angel investors and venture capitalists and should be considered in the capital raising process. Similarly to angel and VC financing, companies seeking SBA and SBIC financing need a strong management team and value proposition, and a highly professional and compelling business plan in order to raise the capital they need.

In The News:

FinFacts Ireland
GM Likely to Seek Direct Loan From Fed
Barron's - Oct 12, 2008
By JIM MCTAGUE CASH-STRAPPED GENERAL MOTORS, WHOSE SHARES FELL last week to an almost 60-year low, appears likely to seek a loan from the Federal Reserve's ...
Where did all that 'lost' money go? MSNBC
Credit unions ready to lend: As banks tighten credit, credit ... Crain's Detroit Business
Fed lays out details for bank loans The Associated Press
Globe and Mail - International Herald Tribuneall 1,401 news articles

The Grand Rapids Press - MLive.com
Get loans to automakers quickly, Engler says
Detroit Free Press, United States - 5 hours ago
The loans, approved by Congress to help automakers retool to build more fuel-efficient vehicles, were signed into law Sept. 30. "The administration has an ...
NAM urges White House action on auto industry loans Reliable Plant Magazine
Obama presses support for ailing Big Three DetNews.com
John Engler calls McCain's pullout of Michigan a mistake MLive.com
Crain's Detroit Business - DetNews.comall 24 news articles

Washington Times
Rescued by Fannie Mae?
Washington Post, United States - 11 hours ago
The data needed are not difficult to assemble: current loan balances, the date loans were originated, original property value (or appraisal for refinances), ...
Fall not Fannie and Freddie's fault Seattle Post Intelligencer
Fannie, Freddie under pressure to start buying The Age
From subprime to stock swoon Globe and Mail
WEBCommentary - Heritage.orgall 256 news articles

Reuters
Obama going from calm to aggressive on crisis
San Francisco Chronicle, USA - 5 hours ago
But he said for many people, overextending themselves on credit cards and home equity loans is no longer a choice but a necessity, just as the government is ...
Obama Unveils Small Business Plan to Shore Up Economy The Epoch Times
Candidates Spar Over McCain Plan for Loans Washington Post
Candidates offer new proposals to aid investors Boston Globe
The Associated Press - Wall Street Journalall 252 news articles

MSN Money UK
Home loan numbers at record low
BBC News, UK - 2 hours ago
The number and value of home loans are at their lowest levels since current records began, according to the Council of Mortgage Lenders (CML). ...
Mortgage lending plunges by 63 per cent Telegraph.co.uk
Lending for house purchases hits six-year low FT Adviser
CML: Lending declines further in August Politics.co.uk
Building.co.uk - The Press Associationall 177 news articles

UPDATE: GMAC Tightens Lending To Borrowers Of Auto Loans
CNNMoney.com - 14 hours ago
The lending unit will extend auto loans to borrowers with a credit score of 700 or higher. In addition, it will scale back longer-term loans, ...
Video: Source: Chrysler, GM Discuss Joining Forces AssociatedPress
GMAC boosts credit standards for auto loans Boston Globe
Briefs: GMAC limits auto loans to credit scores of 700 or better Fort Worth Star Telegram
Bloomberg - Bloombergall 2,102 news articles

Local lenders are making money and loans the old-fashioned way
Minneapolis Star Tribune, MN - 8 hours ago
Wiseway Transportation Service recently got a $2.1 million loan from Bremer Bank to build a new truck terminal about 60 miles south of Chicago. ...

Family Security Matters
Sanchez's column: Don't blame minorities for economic meltdown
Kansas City Star, MO - 15 hours ago
Those people who never should have qualified for home loans in the first place. The uncredit-worthy defaulters of all those nasty subprime loans that caused ...
Crisis has nothing to do with Reinvestment Act Houston Chronicle
Why Republicans Want To Blame Fannie, Freddie and Community ... TPM
Loans to low-income led to current crisis Indianapolis Star
Power Line - New Westall 59 news articles

China Daily
McCain, Obama Promoting Populist Appeals on Rescue (Update1)
Bloomberg - 1 hour ago
Obama promoted a package yesterday aimed at the middle- class, including temporary tax breaks on retirement savings, and federal loans for small businesses. ...
US election: Full text of Barack Obama's speech on the economy guardian.co.uk
Obama Pitches Middle Class Rescue Plan ABC News
Obama Ups the Ante On the Economy BusinessWeek
CQPolitics.com - Rocklin Placer Heraldall 38 news articles

Mercantile Bank Corporation Announces 2008 Third Quarter Results
MarketWatch - 2 hours ago
The early identification of problem loans has provided us the opportunity to closely work with our distressed borrowers, and during the third quarter we saw ...
AmeriServ Financial Reports Increased Earnings for the Third ... Earthtimes (press release)
TowneBank Reports Third Quarter 2008 Financial Results and ... MarketWatch
Sovereign Bancorp, Inc. Pre-Announces Third Quarter 2008 Results MarketWatch
all 27 news articles

loans - Google News

Answering Service ResourceAnswering Service Resource