In today’s increasingly challenging economy, some companies depend on stimulus loans for their small business to stay afloat. These loans are disbursed through the Small Business Administration of your local bank. The process is easy, with minimal paperwork and low interest rates.
Types of Stimulus Loans
There are many types of stimulus loans available for the small business sector. The most basic one is the 7(a) loan. This loan is partially backed by the federal government to encourage lenders to provide capital to businesses with less risk. This is the most popular stimulus loan for small business.
Another popular stimulus loan is the 504 loan. This loan type is characterized by its long term and fixed rate financing policy. It is mainly used for funding major capital projects such as buying real estate or upgrading your current facility. It typically contains a mix of private sector loans, government guaranteed loans and equity investment from the small business.
ARC loans or America’s Recovery Loans were created to provide assistance to small businesses in the form of a short term injection of cash flow. This is particularly aimed at companies that have existing loans and are struggling to pay them. It is fully guaranteed by the government with a moratorium period of up to one year.
Microloans provide similar assistance like the ARC loan, but this stimulus loan is disbursed as small, community-based loans.
The Community Development Financial Institution loan is provided directly to the lenders in the underserved rural and urban low-income neighborhoods. It is primarily intended to cater to local economies and small businesses that might not have sufficient access to capital.
Requirements for Loans
When applying for these stimulus loans you must have a business plan. This will address the aspects of the business such as how it will function in the current market and more importantly what the funding will be used for.
A major requirement is for the business to be independently owned and operated and not be a nationally dominant business in its field. It should be a legal form of business. In other words, it serves as a for-profit business in the United States and uses American products, materials and labor.
Another requirement under the stimulus loan program is that your business should be viable. This means that the business should have the potential to be profitable. This will be determined by the Small Business Administration.
In order to increase your chances of qualifying for a stimulus loan for your small business, it is best to prepare a thorough and detailed application package. This should allow the lender to be familiar with all your plans. Furthermore, the lender can follow detail by detail exactly what you plan to do with the capital. Ensure you meet the requirements of the loans and choose a stimulus loan based on the needs of your business. There are many different types of stimulus loans and your business is guaranteed to find one once you meet the lender’s requirements.