Financing a Business With Uncle Sam’s Help

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Last year, Alan Green, a former TV news photographer turned ad pitchman, decided to buy a business that could also serve as his nest egg, according to an article in The Wall Street Journal.   But when the 59-year old couldn’t get financing to purchase an ailing Molly Maid franchise in his hometown of Salt Lake City, he applied for a government-guaranteed loan through the Small Business Administration. “I was going to finance it with credit cards, but in just three weeks I had a check in my hands,” Green says.

While banks remain the top source of lending for small business owners, the government agency has been increasingly backing their loans to folks like Green often deemed too risky by private lenders. This fiscal year, the agency’s two main loan-guarantee programs have already exceeded a record-high $18.4 billion (50,000 loans), up from $8.3 billion (40,000 loans) in 2009, agency lending data show. And as much as $4 billion (14,600 loans) went to start-ups, which are typically riskier bets for lenders. The loans, which are issued through banks and the not the government itself, are guaranteed to up to 85% against default. Read more here.

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