The United States, by its very nature and government policies,
promotes competition and enterprise. In other words, the fittest survives. However, even in a competitive scenario,
you need to give assistance to smaller firms that, in terms of finance, might not be able to with stand the might
of the bigger business houses in a particular industry or area.
The best form of assistance could be in the form of loans that the
government or any other agency provides. It is with this objective that the U.S. Small Business Administration
(SBA) was brought up in the year 1953.
The SBA is an independent agency of the federal government with
the objective of assisting the smaller business enterprises on the financial front. The SBA mainly counsels, and
understands the business area of the business enterprises and accordingly, assesses the loan needs of the
enterprise. The SBA loans hence, play a critical role in the overall development of the smaller business
The 7(a) program of Loan is the most primary assistance program
for assisting all kinds of existing and start-up business enterprises, and the program guarantees the grant of all
kinds of business loans.
SBA would not necessarily extend loans by itself, but would
guarantee grant of loans from other lending institutions. By following this way, the taxpayers' contribution is
used only in the event of a borrower defaulting on the loan. Hence, it is evident that the SBA loans have been
working wonders for the small business enterprises in the United States.
Savings, Loans, Banks, credit unions, and other kinds of
institutional lenders take part in the SBA Loans program and provide business loans in small amounts. The loans are
categorized under the 7(a) guidelines.
According to the guidelines, all lending partners have to execute
Deferred Participation Agreement, and the Form 750, which kind of paves the way for an agreement to
provide small loans to business enterprises. Hence, the SBA loans and small business administration loans are
granted in a very organized manner.
In the event of a loan that the SBA guarantees, it imposes a
number of conditions on the institutions that grant the loan. These conditions could be related to how the account
must be closed and administered; the other conditions are imposed on all the borrowers. If the borrower is to avail
of the loan, then the borrower must be willing to accept the terms and conditions and additionally, must give an
undertaking that all the terms and conditions shall be complied with.
SBA loans have, no doubt, played a stellar role in the uplifting
of the smaller business enterprises by providing them with loans thereby giving them the capital with which they
can compete with other enterprises at par.