Small business is a term that is used day-to-day. That is because in the past decade the rise of small business has been larger than in any other decade prior. This is largely due to the increasing number of services that are available to small business owners, to enable them to keep their business running.
There really isn't any guidelines for when the term small business is used, however it is simply defined as a business which has a small number of employees. How few employees is debatable, and the definition of when a business changes from a small business to a larger corporation varies both by country and industry. This number is generally less then 100 employees.
As mentioned before small businesses due to their nature, are in most times sole proprietorships, partnerships, or privately owned. Common in may countries, small businesses, are most oftenly related to: accountants, restaurants, guest houses, photographers, small shops, hairdressers, tradesmen, solicitors, lawyers, small-scale manufacturing etc.
Small businesses in often cases are located in private homes, for two main reasons. The first is because it is economical and in most cases convenient. The second reason is that there are several benifits with tax,etc for having your business in your home.
Running a small business is an exciting venture, and a great way to introduce yourself into the business world, and to gain business sense. If you are interested in starting your own small business, I would recommend having a talk with a local lawyer or accountant, who will be able to answer questions that are specific to your local area. Good luck with your new venture!
Showing posts with label business plan. Show all posts
Showing posts with label business plan. Show all posts
Saturday, March 14, 2009
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 benefits 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.
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 benefits 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.
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