Strong woman - white brick wall - get a government loan to start a business?

You’ve seen the guy in the purple suit talking about “free money” and you may even know somebody who knows somebody who got a grant for their business. But how much of what we know about the US Small Business Administration, government grants and small business loan programs is the real deal? If you work from home, can you get a government loan to start a business? 

Small business grants and SBA loans go hand-in-hand in the mysterious world of small business funding. For years, entrepreneurs and would-be business owners have been curious about the proverbial “free grant money” marketers have been selling the American public on for more than two decades. Their story is convincing:

The government is overflowing with free money and just itching to give it away to regular people in the form of grants to go to school, pay off your debts, learn a trade and, of course, start your own business. All paid for by the American people.

So, does this free money exist? How do you get access to it? If you don’t qualify for a grant, maybe you can just get a small business loan from the SBA.

Well, there’s bad news on the SBA small business grants front: They do not exist, not in the way most of us hope.

There is such a thing as a government grant, but not for starting a business. In fact, the SBA’s website clearly states: “SBA does NOT provide grants for starting and expanding a business.”

SBA loan programs, on the other hand, do exist. In fact, I worked with a group of three African American women who were rebranding and expanding their home-based Omaha event planning company with the funding they received from an SBA loan.

So, yes. You can get an SBA loan for your home-based business. So let’s talk about SBA loans


What Does the SBA Actually Do?

Some people are under the impression the SBA is where the magic happens. With the stroke of a pen, the SBA can make or break a business. Not true. The SBA provides small business owners with tools and resources to strengthen their businesses. It’s really up to the actual business owner to make the “magic” happen.

Think of the SBA as a giant project manager. The SBA distributes information and formalizes the processes by which small businesses can access government programs and resources. 

Think of the SBA as a giant project manager.

SBA loans and government grants do not actually come from the same place. SBA loans come from lending institutions like banks and community organizations, and they are not a free-for-all for any joker with a good idea.

The SBA provides banks with specific criteria for constructing SBA-backed loans then the SBA guarantees the bank that you will repay that loan. If you don’t, the SBA is on the hook for the money.

So you better believe there are firm guidelines for how, when, if and for whom the SBA backs a small business loan.

Government grant money, on the other hand, comes from the federal government. The SBA coordinates programs through which the federal government allocates funding in the form of grants. This funding generally goes to non-commercial organizations in communities across the country that qualify as one of the following:

  1. High-growth, high-impact firms that conduct scientific research on innovative technology for the sole purpose of bringing that technology to market
  2. Public and private sector organizations whose primary focus is the economic development of a particular geographic location

These community organizations then provide loans to small businesses at the local level.


How Do You Qualify for a Loan from the SBA?

The Small Business Administration does not lend money in the form of SBA loans. SBA loans actually originate with lending institutions, not the SBA. The Small Business Administration serves as a liaison between eligible small businesses and lending institutions, often vetting small businesses to ensure they are viable and have the best chance of long-term success before connecting them with banks and community organizations.

The SBA does not lend money in the form of SBA loans

Many of the SBA’s loan programs help bolster the success of socially- and economically- disadvantaged businesses by providing them with business development resources. SBA certification programs for minority-owned, veteran-owned, and women-owned businesses provide new and growing companies with a bit of an advantage.

According to the SBA, small business certifications document a company’s special capability or status. Certifications are a signal to banks and community organizations that certified businesses may qualify for SBA-backed loans.

SBA loans are a curious thing to many small business owners. They are one part mystery and onepart fantasy, perhaps because of their association with the ever-elusive small business grant.

The fact is, obtaining an SBA-backed loan requires the same effort you would put forth to obtain a traditional small business loan. In some cases, getting an SBA-backed loan government loan to start a business (or expand an existing business) requires more effort. The difference is you have the U.S. Small Business Administration to sort of help you along the way.

All hearts and minds clear? If you have any questions about SBA loans or about getting a government loan to start a business, I have a friend who can answer them. Just ask away in the comments section.