Alternative Venture Finance: Federal Grants and Loans | kkr-fans ...

Although most companies looking for venture capital initially think of angel investors and venture capitalists, a sizable option supply of financing is federal grants and loans. The two biggest federal grant programs are run by the Modest Company Administration (SBA), and by Modest Business Investment Organizations (SBICs).

An SBA loan, regardless of whether or not it?s a direct loan from the SBA, or, as is a lot more typical, a bank loan assured by the SBA, is essentially a bank loan. The advantage of it versus a classic bank loan may be the rate. SBA rates are generally a lot much less than standard organization loan rates.

In most situations, inside a guaranteed SBA bank loan, the SBA guarantees 90 percent with the loan will likely be repaid towards the bank. As such, banks are at significantly less risk than in most other loans, and are a little a lot more flexible with regards to who they provide these loans. Nevertheless, the SBA typically demands the founders from the organization to personally guarantee the loans, which tends to make them risky ought to the venture collapse.

Alternatively, Little Enterprise Investment Businesses (SBICs) are privately organized corporations that happen to be licensed and regulated by the SBA. Little or emerging corporations which qualify for assistance from the SBIC system can get equity capital and/or long-term loans from these organizations. Essentially, these firms supply their own capital, which can be supplemented by federal funds, for the organizations they fund.

Interestingly, U.S. taxpayers rewards from the SBIC program as tax revenues generated from effective SBIC investments have far more than covered the expense of the system. Likewise the program has made hundreds of thousands of jobs.

In summary, SBA and SBIC financing are viable alternatives to financing from angel investors and venture capitalists and really should be thought of within the capital raising method. Similarly to angel and VC financing, businesses searching for SBA and SBIC financing want a strong management group and value proposition, and a highly expert and compelling enterprise strategy in order to raise the capital they need.

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Source: http://kkr-fans-news-blog.com/alternative-venture-finance-federal-grants-and-loans/

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