The Small Business Administration (SBA) 7(a) small business loan program is one of America’s most important resources for small business loans. With the SBA 7(a) loan program, small business owners can get loans to start a business or expand an existing business, as long as they meet certain eligibility requirements. However, due to exceedingly high demand for these small business loans, the SBA announced that as of July 23, 2015, their 7(a) small business loan program has already reached the 2015 cap on the amount of new loans that can be made.
On the one hand, this is a good sign for the overall U.S. economy – it’s good news that so many small business owners are feeling optimistic about the future and are willing to invest in their business’s growth by getting a loan, and it’s also good news that so many small business loans are getting approved. The SBA announced that so far in 2015, they have already approved more than 45,000 7(a) loans totaling more than $16.5 billion, which is a 25 percent increase compared to the same time period a year ago.
However, the bad news is, Congress only authorized a certain amount of money for the SBA 7(a) loan program, and now that money has been exhausted – so any future small business owners who were counting on getting a 7(a) loan might find themselves having to search for other options.
Here are a few ideas for how small business owners can get small business financing, even if SBA 7(a) loan money is no longer available to you this year:
Small Business Grants
Small business loans are not the only way to get money to expand your business – there are also a variety of small business grants that award money to eligible business owners. Small business grants are often designed for specific purposes or limited to certain categories of businesses or certain traditionally underrepresented business owners (for example, there are some special grant programs for women-owned businesses or minority-owned businesses, or businesses owned by a person who has a physical disability, etc.).
It’s worth checking to see if your business might qualify for a grant from state or local government, or from a private nonprofit foundation that helps support entrepreneurship. For more about small business grants, check out this Kabbage article, “Pros and Cons When Using Small Business Grants,” or read the article from Kabbage CMO Victoria Treyger, “11 Grants for Women-Owned Businesses You Need to Know About.”
If you can’t get a small business loan or line of credit from a bank, another option is to borrow for your business by using your personal or business credit cards. But this approach has drawbacks – interest rates are much higher for credit card debt than they are for business loans and lines of credit, and you might put your financial future at risk before you can even get your business off the ground.
Another option for small business owners trying to raise capital is to set up an online crowdfunding campaign. There are many low-cost, easy-to-use online platforms like Kickstarter, GoFundMe, and others that let you ask people online (your friends, family, social media audience, existing customers, etc.) to give money to support your project and help your business grow. You can use a variety of strategies to raise donations, such as giving away prizes or letting people have a behind-the-scenes experience of the new product or service you’re trying to develop.
One drawback of crowdfunding is that it takes time and the results can be unpredictable: according to stats cited in this Kabbage article, the average crowdfunding campaign lasts around nine weeks and raises approximately $7,000. You might be better off using other options to get the right amount of money quickly, rather than waiting weeks for results that might not materialize from crowdfunding alone.
Along with the rise of crowdfunding tools, there are a variety of platform lenders available online that are giving small business owners additional options to get a small business loan. These alternative lenders include platforms like Kabbage and peer-to-peer lenders or online marketplaces. According to a CNBC article, “Why Small Businesses Don’t Want a Loan,” these nonbank or platform lenders now make up approximately $3.2 trillion of economic activity, and they are especially in-demand from small businesses with revenues under $5 million – the same businesses that tend to have the most difficulty securing a traditional bank loan.
Even if your business was in line to receive an SBA 7(a) loan, don’t worry – you still have multiple options for how to raise financing for your business, whether it’s a bank loan, an alternate online lender, a crowdfunding campaign, or just the costly-but-effective method of running up debt on your credit cards. There are still plenty of ways to get money for your small business.
UPDATE: Hopefully the SBA’s 7(a) loan program will have an additional infusion of cash very soon; a recent update from the SBA states that they are working with Congress to possibly approve more money for the loan program which could help keep giving small businesses the funds they need through the end of 2015.
Kabbage Takeaway: The Small Business Administration (SBA)’s popular 7(a) small business loan program has run out of money for 2015 due to high demand from small business owners – but fortunately there are several other options for small business owners who want to get loans, even if the SBA loan is no longer available.