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Bankruptcy InformationAlternative Venture Finance: Federal Grants and Loans
by:
Dave Lavinsky
Piece most companies seeking venture capital ab initio think just about angel investors and venture capitalists, a large alternative source of funding 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 bonded by the SBA, is basically a bank loan. The benefit of it versus a traditional bank loan is the rate. SBA rates are typically more less than traditional business loan rates.
In most cases, in a bonded SBA bank loan, the SBA guarantees 90 percentage of the loan wish be repaid to the bank. As such, banks are at more less risk than in most another loans, and are a bit more flexible with regards to who they offer these loans. However, the SBA normally requires the founders of the institution to in person
guarantee the loans, which does them risky should the venture collapse.
Alternatively, Small Business Investment Companies (SBICs) are in private organized corporations that are accredited and regulated by the SBA. Small or emerging businesses which qualify for assistance from the SBIC program can obtain 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 benefits from the SBIC program as tax revenues generated from booming 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 funding are viable alternatives to funding from angel investors and venture capitalists and should be considered in the capital raising process. Likewise
to angel and VC financing, companies seeking SBA and SBIC funding need a strong management team and value proposition, and a extremely
professional and compelling business plan in order to raise the capital they need.
Just just about the author:
GT Business Plans has developed over 200 business plans for clients that have jointly raised over $750 million in financing, launched many
new product and service lines and gained competitive advantage and market share. GT Business Plans is the sister site of GT Venture Capital
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