SBA 8(a) Archives - Art of Business Valuation

The 6 Steps To Get An SBA Startup Loan

by Greg Caruso | Apr 12, 2022 | SBA Business Valuation and Appraisal

The United States Small Business Administration—or SBA—loans are primarily for new businesses to get off the ground.

The amounts you can receive vary by loan program but some range up to $5 million! Funds also may be more accessible to some borrowers who struggle to qualify for other business financing methods.

However, most new business owners say that applying for an SBA loan can feel daunting because of the eligibility requirements and application procedures imposed by individual SBA lenders.

Follow these steps to get an SBA startup loan:

Step 1 –Calculate Your Startup Costs

Before you apply for an SBA startup loan, you need to evaluate the needs of your business. First, consider one-time startup costs and then recurring expenses (which may include everything from renting office space to buying equipment and covering payroll for your first employees).

Step 2 – Check Your Eligibility

The Eligibility requirements vary by SBA loan type and individual lender, there are a few general requirements that a business must meet to qualify for an SBA startup loan.

A Business Must:

Operate for profit in the U.S. or its territories
Constitute a small business by SBA Standards
Demonstrate a need for the loan funds
Have reasonable invested equity
Have already accessed alternative financial resources, such as personal assets
Use the loan proceeds for an acceptable business purpose
Not have any delinquencies on debt to the U.S. government

Step 3 – Write a Business Plan

Most startups do not have extensive financial records like established businesses, so business owners can improve their approval odds by drafting a comprehensive business plan that demonstrates how the business will make money and on what timeline.

Step 4 – Choose a Loan Type

There are several loan programs to meet a range of borrowing needs, however not all of them are good fits for startup companies.

The Options Include:

SBA Microloans
SBA Community Advantage Program
SBA 7(a) Loans
SBA 504 Loans

Step 5 – Research and Compare Lenders

Borrowers must apply for an SBA loan through an approved financial institution and meet the individual lender’s application and credit requirements. The SBA provides small business owners the Lender Match Platform, which helps business owners choose the best lender to fit their needs.

Step 6 – Prepare and Submit Your Application

Individual lenders impose different requirements, but there are some materials that are requested by most lenders. In addition to a business plan, prepare the following documents as part of your loan application:

Copies of business licenses and certificates
Business overview and history
Personal and business tax returns for the past two years
Current and projected financials for one to three years
Profit and loss statement and balance sheet
Loan application history

Read The Full Article By Forbes That Covers Each Step In-Depth HERE.

Questions, want to know more, contact Gregory R. Caruso, Harvest Business, LLC, t/a The Art of Business Valuation.

How to Increase Business Value for Government Contractors

by Greg Caruso | Mar 29, 2022 | Exit Planning Business Valuation & Growing Business Value

When these lessons are implemented by management, government contracting company’s business profits, resiliency, and business value all increase.

As a business valuator and business broker who spent much of his career in the Washington, DC area I have frequently worked with government contractors. For a list of industries we have prepared valuations for click here. Technically, government contractors are not a specific category of business. They get lumped into their specific underlying industry. Yet, government contractors are usually quite different from companies serving private industry.

Here are a few things I have learned.

LESSON 1 – Obtain Transferable Long Term Contracts

In order to increase transfer or business sales value long term contracts that can be transferred to a reasonable cross section of buyers should be sought out. Many government contractors have status certifications. These status certifications are important for obtaining work in a competitive market. But, if the focus is on building value also consider the effect if the status used to obtain the contract are difficult to transfer to a larger organization with capital to invest. 8(a) because of it’s limited life can be a great way to grow a firm but check carefully about transferability if you are counting on 8(a) contracts to increase your business value.

LESSON 2 – Obtain Profitable Fixed Fee Contracts

Fixed Fee contracts where you can make a profit are preferable to Time and Material contracts. Typically there are two types of contracts, fixed fee where you take the risk of the cost of performance. But, you also get the benefit of a larger profit if you can do the work for less cost. When properly managed by a government contractor that knows their costs fixed fee can be much more lucrative. Time and material allows a specified mark-up above costs. While these are safe, unless they are very large they cap your profitability at a low rate and frankly, small dollars.

LESSON 3 – Obtain multiple vehicles (contracts) to facilitate growth.

Many small government contractors win one award and think they are fine. But this leaves the company susceptible to contract termination. Contracts can terminate for many reasons often that have little to do with your performance. Government contracts can take years to obtain so set goals and begin working on this now. (Need a free goal setting / planning system, click here) Over time obtain multiple contracts so if one terminates the company has work and is still in business.

LESSON 4 – Take 8(a) contracts anyway

Due to the profitability of the right 8(a) contracts it may be prudent to continue obtaining them even if they are not transferable. Lets face it, earnings / money in your pocket today is always good. Yes, Lesson 1 is important but so are profits today. But, do not take 8(a) contracts if better less restricted contracts are available. If using this strategy both save some of the profits and look for non-8(a) work for when graduation day comes. (SBA statistics indicate that over 60% of government contractors do not survive 8(a) graduation. Don’t join this statistic.)

Obviously leadership, team building, hard work, and a little luck play a HUGE role but the four lessons shown above when properly implemented will increase business value.