One of the best sources of capital when you are trying to start a small business is a loan guaranteed by the Small Business Administration (the SBA). Although the SBA does not actually give you the loan, they offer a guarantee to the lending institution, which helps you get better rates and loan terms than if you only applied for a loan through normal means. This guarantee of traditional loans for small businesses is the primary role that the SBA plays in aiding small business owners, however there are other ways they help as well.

For example, the SBA is also dedicated to the proliferation of minority and female owned small businesses. If you fit into either of these categories, you might be eligible for a specific SBA loan or grant program. Another way to qualify for specialized SBA loan programs is if you can prove your business performs a specific service towards the betterment of the community as a whole.

In addition to loan services, there are many other services offered by the SBA. They also help small business owners with training and management skills, offering classes and seminars through their local offices. They even offer entrepreneurs free one-on-one or online counseling from experienced business owners. The SBA is dedicated to supporting small businesses throughout the country, and helping them grow and progress.

Another type of loan many businesses take out early in their development is a small business administration loan. These are loans taken out to cover operating expenses, and they can keep you in operation while you have revenue sitting in accounts receivable. This is money that is owed to you by clients, so it is treated as an asset in your accounting system, even though you don't have it yet. Lenders will consider this sufficient collateral to give you a loan to cover operations for a finite length of time.

Other Avenues for Small Business Loans

There are other options available to entrepreneurs looking to start a small business, but many of these are either much more difficult to attain, or much riskier to your assets. For example, venture capital money may be the ideal for many future proprietors, but it's very difficult to come by. Venture capital is not secured against anything you own, so typically if your business venture does not succeed, nothing that you own is endangered. It should be obvious that this would be the ideal source of start-up funds for your business, but equally obvious that it's an extremely competitive market. Banks know that, for the most part, they can demand collateral for loans, so it's rare to get an unsecured venture capital loan.

If you don't have a business yet, but you do have a home, a home equity loan is another option for you to secure funds. They are much easier to obtain than venture capital money or traditional commercial loans. However, it is wise to be wary of financing a business venture entirely with a home equity loan, as that means your home could be forfeit. It is not uncommon to finance only a percentage of your business with a home equity loan (even if you could finance more of it or all of it with the maximum value of your equity) and supplement those funds with a traditional loan. The traditional loan will very likely have a higher interest rate, and the interest payments will not be tax deductible--but if there's any chance that you could lose your home, slightly higher interest payments start to seem worthwhile fairly quickly.

There are three basic types of loans which cover almost every home equity or small business loan that you might take out. You will decide between a fixed rate, an adjustable rate, and a balloon mortgage or loan based on how long you think it will take to pay back the loan and what kind of profits you expect form your business. In recent years the Internet has cut the application and waiting time by almost two thirds, and lenders realize that small business owners are increasingly savvy about finding the best rates--so you can get a home equity or commercial loan with interest rates as low at 4 or even 3.8 percent if you put together a solid proposal and shop around.

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