This chapter contains information on sources of business development
assistance and possible sources for funding. We diverge slightly from
providing strictly resource information to provide information on why
VR should become involved in a community’s economic development
efforts and on some suggestions for doing this. The chapter continues
by describing minority self-employment resources. It closes with a listing
of community resources, books, and organizations.
The chapter begins by
describing the Small Business Administration because it is the most
prominent and widely disbursed source of business assistance in the U.S.
Small Business Administration
Created by Congress in 1953, the U.S.
Small Business Administration (SBA) is one of the main sources of
small business assistance and funding in existence. Today, SBA’s
offices in every state, the District of Columbia, the Virgin Islands,
and Puerto Rico offer finance guarantees (in the form of loan guarantees
rather than direct loans or grants), training, and advocacy for small
firms. In addition, the SBA works with thousands of lending, educational,
and training institutions nationwide. The U.S. Small Business Administration
recently refocused its efforts to provide customer-oriented, full-service
programs and accurate, timely information to the entrepreneurial community.
SBA programs and services include business counseling and training;
lending programs; and special focus programs for international trade
assistance, women business owners, and Native American Business Owners.
Each of the programs is discussed where appropriate in the following
sections of this chapter.
Working With a Local Small Business Administration
Small Business Development Center
Most SBA staff are not experienced with working with people who have
disabilities and their resources may not be accessible to people with
special needs. Publications may not be brailled, computers may not have
large print readers or talking software and there may not be interpreters/communication
support for persons who are deaf or hard of hearing. Therefore, it is
important that you visit your local SBA Small Business Development Center
(SBDC), acquaint yourself with the facility and resources, and meet
the staff. Assess their accessibility or lack of it and determine the
supports a consumer would need to use its services. A consumer might
need you to accompany him or her on one or more visits to the SBA.
Sources of Business Development Assistance
A consumer should
always make an appointment before going to a business counselor and
allot one to two hours for the initial visit. Before the appointment
the consumer and/or counselor should check to see if the building is
physically accessible, whether a sign language interpreter is needed,
and whether a note-taker or tape recorder is necessary. A business development
consultant may require that the consumer fill out statistical information
on an intake form and that he or she also be prepared to take notes
during the visit. The consumer should gather brochures, business plan
outlines, or any other information the consultant may have available.
Business Information Centers (BICs) - As the SBA's
technology toolbox, the business information center contains business
development reference materials manuals, computers and business development
software, access to telecommunications, and counselors to help small
businesses get started and grow. BIC counseling and training are provided
by SCORE (the Service Corps of Retired Executives). There are nearly
40 BICs nationally.
One-Stop Capital Shops (OSCSs)
The One-Stop Capital Shop is the SBA's contribution to the Empowerment
Zones/Enterprise Communities Program (EZ/EC), a federal interagency
initiative that provides a variety of resources to designated socially
and economically distressed communities. OSCSs offer centralized access
to a full range of SBA financial and technical assistance, other federal
agencies, state and local governments, and the private sector. Within
the OSCSs, Business Information Centers offer the latest high-tech hardware,
software, interactive videos, telecommunications, and other tools to
help the small business owner plan, develop spreadsheets, and access
market research databases. Counselors train people on starting, running,
and/or growing a small business.
Service Corps of Retired Executives (SCORE) - This
free SBA program matches almost 13,000 volunteers with small businesses
needing advice. The volunteers’ collective experience spans the full
range of American enterprise; they share their management and technical
expertise with present and prospective small business owners and managers.
There are 388 chapters and 800 other locations.
Small Business Development Centers (SBDCs)
- The SBA administers SBDCs to help current and prospective owners
develop and manage their small businesses. SBDCs are a cooperative effort
of the SBA, private sector, educational community, and state and local
governments. There are over 950 SBDCs located primarily at colleges
and universities in all 50 states. Learn more about
working with SBDCs
Tribal Business Information Centers (TBICs) - Twenty
TBICs serve Native American reservation communities in the states of
Montana, North Dakota, South Dakota, Oregon and the Navajo Nation. TBICs
are SBA resource partners, offering computers, one-on-one business counseling
services, and business management workshops to small business owners.
The Women's Demonstration Program - This SBA program
trains and counsels women in all aspects of owning or managing a business,
including financial, management, marketing, technical assistance, and
procurement. There are 60 women's business centers nationally.
Women’s Network for Entrepreneurial Training
(WNET) - This SBA program is available through SCORE
and SBDCs. It is a year-long, one-on-one program where established women
business owners serve as mentors to protegees who are ready to expand
their businesses. There also is a WNET Roundtable that mentors and supports
women business owners in a group setting.
Funding Sources for Business Start-up or for Expanding
or Operating an Existing Business
Commercial Lending Institutions (banks and credit
unions) - These loans generally are hard to get. A potential
business owner is expected to contribute a minimum of 10% towards the
business before the bank considers a loan. A bank also requires collateral
(e.g., real estate, vehicle) or co-signer for the loan.
Many commercial lending institutions offer the following SBA guaranteed
loans. However, one author (Zuckerman, L. 1990) states that most banks
will not make an SBA guaranteed loan for less than $100,000.
Program: 7(a) Loan Guaranty - Through 7(a) the SBA
guarantees loans to small businesses unable to obtain financing at reasonable
terms through normal lending channels. The program promotes small business
formation and growth with loans for many business purposes, such as
real estate, expansion, equipment, working capital or inventory. Terms
- SBA guarantees
75% of the loan amount up to $750,000
- SBA guarantees
80% for loans of $100,000 or less
- The maximum
interest rate is 2.75% over the prime lending rate
- Loan periods
are up to 10 years for working capital and up to 25 years for fixed
The 7(a) Program
offers the following loans:
- Low Documentation Loan (LowDoc) - This program
reduces paperwork for loans of $100,000 or less. In order for the
lender to request a LowDoc guaranty, the applicant must submit a one-page
application and meet all of the lender’s requirements. Approval relies
on the strength of the applicant's character and credit history.
- CAPLines - CAPLines finances a small businesses'
short-term, cyclical working-capital needs. CAPLines funds five types
of short-term working capital loans: the Seasonal, Contract, Builder's,
Standard Asset-Based, and Small Asset-Based. Under CAPLines, the SBA
generally can guarantee up to $750,000.
- SBAExpress - Makes it easier and faster for lenders
to provide small business loans of $150,000 or less, allows lenders
to use their own forms and processes to approve loans guaranteed by
the U.S. Small Business Administration, provides a rapid response
from the SBA--within 36 hours of receiving your complete application,
lets lenders take advantage of electronic loan processing, and helps
lenders provide smaller revolving. Lenders participating in SBAExpress
can use their own forms and processes to approve loans in amounts
up to $150,000, and provide minimal paperwork to the SBA to obtain
a 50 percent guaranty on the loan, and may approve unsecured lines
of credit up to $25,000. The maximum loan amount for SBAExpress is
and Women’s Prequalification Loan - This program allows
the SBA to pre-qualify a guaranty for loan applications of $250,000
or less before the applicant goes to a bank. The program evaluates
an applicant's key financial ratios, business history, loan request
terms, character, credit, experience, and reliability rather than
assets. Designated intermediaries work with the business owner to
review and strengthen the loan application. SBA offers this program
through a number of its district offices nationwide — contact your
nearest SBA district office to find out if it is available in your
Development Companies - A Certified Development Company
is a nonprofit corporation contributing to its community’s or region’s
economic development. Nationwide, approximately 290 CDCs work with
the SBA and private-sector lenders to finance expansion or modernization
of small businesses. Each CDC covers a specific area, providing long-term,
fixed-rate financing to small businesses for real estate, machinery,
and equipment. At least 10% of the loan amount is provided by the
borrower, 50% by an unguaranteed bank loan, and the remainder by an
SBA-guaranteed debenture (a maximum of $1 million).
Assistance Loans - There is no funding for this SBA
program. However, people with disabilities may qualify for other SBA
Equity Financing - This is where business funds are
provided in return for part ownership. Ownership might be:
- A general partnership
where the individual participates in management, decisions, and profit.
- A limited partnership
where there is no say in the management or decision making and liability
is limited to the investment.
- Stock ownership
in a corporation where the investor purchases shares of the company.
and Friends - Family and friends are the most frequently-used
source of business financing. Often family and friends are co-signers
for bank loans.
Grant Money - Currently there is no stable and consistent
resource for grant monies for people with disabilities who want to start
Loan Pools or Peer Lending - Peer lending loans
are made based on an individual’s integrity and character — not on assets
or collateral. Each of the 4 to 7 people in the “borrowing group” is
a business owner. Each must prove to the group that he or she can repay
his or her own loan, and all loans must be current before anyone can
borrow more. The group provides monitoring, networking, and support.
For example, Women’s Economic Growth (WEG) in Weed, California, was
formed in 1988 to improve the economic self-sufficiency of women in
Siskiyou County, California. BankAmerica Community Economic Development
Initiative funds support WEG's peer lending program. WEG offers training
and technical assistance (in lending and borrowing), peer support, and
step-up loans ($1,000 maximum for the first loan, $2,000 maximum for
the second loan, etc., based on the group’s repayment history and overall
performance). WEG prepares borrowers to move on to other public and
private lenders. Peer lending groups complete a six-week certification
process so they may act as their own loan committees. Each group resolves
its members’ business problems and deals with delinquencies. This labor-intensive
approach reduces the risks for both WEG and the borrower.
Microloan Organizations -
These nonprofit agencies usually make loans that are less than $10,000
to targeted populations. However, some agencies provide larger loans
— up to $25,000. These organizations include:
- This SBA program is offered through many microloan organizations.
Please see the discussion under “Small Business Development Center.”
and Women’s Prequalification Loan -
This SBA program is offered through many microloan organizations.
Please see the discussion under “Commercial Lending Institutions.”
Nontraditional Lenders - These include sources such
as The Money Store, AT&T Financial Corp, credit cards, etc.
Owner’s equity - This is
the owner’s investment in the business.
Partnership - The business owner partners with one
or more others to provide financial support for the business and/or
allow each to share complementary strengths. For example, a talented
electrician with limited telephone, ordering, organizational, scheduling,
customer service, office, and bookkeeping skills might partner with
someone skilled in those areas.
Purchase Order Loan - This
short-term loan provides working capital to a business. The lender loans
money for eligible costs against a signed purchase order.
Small Business Development Centers (SBDCs)
- Administered by the SBA, SBDCs help current and prospective
small business owners develop and manage their businesses. The SBA,
private sector, educational community, and state and local governments
cooperate to offer SBDC services. There are over 950 SBDCs located primarily
at colleges and universities in all 50 states. Some SBDCs are participating
in a pilot Microloan Program that provides short-term, small business
loans of up to $25,000 for machinery and equipment, furniture and fixtures,
inventory, supplies, and working capital. The money can not be used
to pay existing debts.
Small Business Innovation Research Program (SBIR) -
This SBA program allows qualified small businesses to propose innovations
that meet the Federal Government’s specific research and development
needs. Applicants compete for awards to study the feasibility and scientific
and technical merit of an idea. These “Phase I” awards are awarded for
up to 6 months. Competitive “Phase II” awards expand on the Phase I
results and are granted for periods of up to 2 years. “Phase III” awards
commercialize the Phase II results with private sector or non-SBIR federal
Small Business Investment Company Program
(SBIC) - Privately-owned SBIC’s invest in, or loan capital
to, small businesses. These for-profit programs invest their own money,
plus that from SBA guaranties and/or from sales to the SBA of preferred
stock. Although many SBICs invest in a wide variety of businesses, some
specialize in certain fields or businesses with new products or services
that have strong growth potential.
Social Security Administration (SSA)
- In 1994, the social Security Administration developed Social
Security Work Incentive Programs to (1) increase employment of current
and future SSA disability beneficiaries, (2) increase self-sufficiency,
and (3) reduce dependency on SSA benefits. While most of these work
incentives are used when a person with a disability works for someone
else, two programs — the Impairment Related Work Expense program (IRWE)
and the Plan for Achieving Self-Support (PASS) program can be used for
people who want to start their own businesses. Of the two programs PASS
plans are used most often for self-employment. For those who qualify,
the PASS plan provides an additional source of business funding that
is not accessible to people without disabilities.
Related Work Expenses (IRWE) - An IRWE enables recipients
of SSI benefits to recover some of the costs of work-related expenses
incurred as a result of the disability.
- Plan for Achieving Self-Support (PASS) -
Under this Social Security Work Incentive Program a person may set
aside income and/or resources over a specific period of time to fund
necessary goods and services to establish a business or to become
a partner in an existing business. PASS funding may be used in conjunction
with conventional loans and other business finance sources. The Social
Security Administration reviews written PASS and business plans before
authorizing a PASS.
Capital - Venture capitalists invest in businesses whose
owners are “experts in their fields.” The businesses must have proven
markets and high profit margins and growth rates.
Veterans Administration -
The Veterans Administration offers vocational rehabilitation services
for veterans whose disability is service connected. Veterans with serious
employment handicaps may receive self-employment assistance. Veterans
who qualify for assistance, typically people with the most severe disabilities,
are considered to require self-employment to achieve a positive rehabilitation
outcome. These veterans may receive comprehensive training; minimum
stocks of inventory or supplies; essential equipment; technical assistance
through the period of start up, and incidental services such as business
Vocational Rehabilitation -
Depending on an individual’s needs VR agencies may use Section 110 funds
to assist with opening a business. Amounts vary depending on the type
of business. Another use of VR funds distributed in this manner is that
they can be used to leverage funds from other sources such as a microloan
© July 1998, 1st Revision June 1999, 2nd Revision February