Bootstrap your startup and keep control of your success! Think you want an SBA 7(a) Small Business Loan? If so, then read the fine print! Many aspiring entrepreneurs that I meet believe that “cheap” loans are given by the SBA and they will simply “forgive” these loans if your business fails. Ummm…No.
SBA loans are NOT given by the Small Business Administration. They’re NOT cheap, and they’re NOT easily “forgiven.”
How SBA Loans Work
This is how SBA loans work: You and your company are reviewed in detail by the SBA. If they have confidence in your company’s potential success and…more importantly…your ability to pay back the loan, then they will guarantee up to 75% of the loan value. Now, the banks who are still at risk for 25% of your loan value will evaluate your loan application for an SBA-guaranteed loan.
- SBA charges you a fee up to 3.75% of their guaranteed amount at settlement.
- The bank sets the interest based upon your credit worthiness and the robustness of your company. However, they cannot exceed the SBA maximum limit of 13.0%.
- If you do the math, then this loan isn’t nearly as cheap as advertised or believed.
In some cases, your SBA loan fees and interest may rival a good credit card! Click To Tweet
And, should you not be able to pay the loan, the SBA will cover their guaranteed amount to the bank. YOU STILL OWE THE FULL AMOUNT. However, frequently, the SBA will settle for a negotiated, lesser amount. An SBA loan is not free or even cheap money.
Venture capital isn’t as viable or helpful as you may think.
- Venture capital funding is RARELY an option for first-time entrepreneurs. In fact, without proven startup experience by at least one the founders, most VC firms won’t even talk with you. Even if you’re an experienced and proven entrepreneur, venture funding should be a last resort.
- There are some serious strings attached with bringing on investors or, should I say, your new partners and bosses.
- To obtain venture funding, you are selling part of your company to investors who may have completely different goals than you have. And you must fully understand that they usually don’t make any money until there is a liquidity event or acquisition, and this simple fact drives all their decision-making. Your new co-owners want to jump off the bus as soon as possible.
Even worse, their dollars have bought your new co-owners visibility into everything that you do. Instead of making the call yourself, decisions are now group decisions where politics frequently play a role. If you get a bad VC firm, it’s like making a deal with the devil.
Staying in the Entrepreneurial Race Long Enough to Succeed
The key to entrepreneurial successful is staying in the race long enough for success to occur.
- Success RARELY happens fast.
- Being a successful entrepreneur is like being a marathon runner.
- You must pace yourself for the long run to find success.
- Debt and venture funding turn your entrepreneurial race into a sprint.
- This pace is unsustainable if you don’t immediately find success.
- Your entrepreneurial journey is now on your debt owner or investors’ pace…not yours.
Government Contracting Academy has a different philosophy and dissuades their clients from falling into the debt trap. They walk their clients through a process to launch a Federal Government contracting company from home on a shoestring budget while keeping their “day job” and steady income. By doing this, our clients’ can run the entrepreneurial marathon necessary to find success.
When you financially pace your entrepreneurial journey, the pursuit of your dreams remains in your control…and not with a bank or venture capital firm. Click To Tweet
Get Started on Your Entrepreneurial and Financial Goals Today!
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About Randy Wimmer
Do you want to take charge of your career by becoming an entrepreneur but have family and financial obligations that prevent you from quitting your “day job?”
If so, then launching a GovCon startup that enables you to bid on millions of dollars in Small Business Set Aside government contracts from home may be the solution. It was for me. I wrote the winning proposal for a $15M contract from my kitchen table after my kids went to bed. With guaranteed contract revenue, I hired employees without ever going a penny in debt. After winning over $170M in contracts, I sold my company and committed to helping others achieve their entrepreneurial dreams. I launched Government Contracting Academy to mentor, coach and train aspiring entrepreneurs achieve financial success in the Federal Government contracting market.