Questions about the SBA? (Small Business Administration)

[silence_of_stone]

Anyone here go through the SBA to start their studio businesses? What was the experience like for you if so?
I know these things are different from country to country, so if you are in the USA let me know.
Seems like a good way to cut the overhead down and get yourself started.
Thanks,
Kev

[froyo]

Hello. Silence the SBA is a great option, but certain things have to happen. First off, nobody is going to loan you one penny unless you have collateral, a 'blow your socks off business plan' or can demonstrate some sort of stable business history, or a combination of all three things. A bank won't do it, the SBA won't do it. Mind you, there are always one in a million stories about this or that, but this is a basic fact as I and others have experienced it. It's a little bit like when you are fresh off college and people won't give you a job because you need experience. And of course you can't have experience unless somebody gives you a job.

In this case, the people who are giving you the money want to know that your business can succeed, and thus will get them their money back (plus interest). However, how are you supposed to get a business off the ground without money?

Here is the deal with the SBA. They will give you money, but you have to be denied loans through the regular channels. In other words, you have to apply for a business loan with one or two banks, get denied, then the SBA can step in. The way the SBA works, is once you have been denied by a bank, and approved by the SBA, they will turn around a guarantee the loan to the bank. So the bank will be the one lending you the money, the SBA will guarantee it. If you are a minority that can sometimes help.

However, they will NOT finance start ups. Let me repeat that. They will NOT give you money to get a business off the ground. If you have been in business for a while, you can apply for a loan, but not for start up money. They do have a program called a Microloan. If I'm not mistaken it is limited to $10K. They are much more liberal with this. They will probably issue it to start ups. But how much can you really do with $10K?

So if you have collateral, just about any bank will shell out $50K to $150K. Say if you put up your house for example. More than that you will probably need to come up with some other collateral. A well thought out, professional business plan that makes financial sense is a must for any loan request, it doesn't matter if it's a bank or the SBA. If you show up for an interview without one, you may as well go home. The SBA will help you write a good business plan, but when it comes to loan request time, it better be there. Finally, if you have operated your business on a shoestring and shown some success, even small success, that will show the money people that you are legit.

This last point may be easier than what you think. If you are say, a freelance musician or audio engineer, you can 'creatively' include that as part of the business's history. Most small businesses start with either venture capital, a loan secured with collateral or on a shoestring. Maxing out credit cards, hitting up family and friends, operating out of your bedroom, that sort of thing.

The SBA will have all sort of counseling sessions where you can get down to the nitty gritty of the situation. Try

www.sba.gov
www.cdfa.gov

The CDFA site is one where you can search through government grant and loan programs. However they are very, very, very specific. Good luck.

[froyo]

Here is a similar thread from the TDM Mac forum.

[silence_of_stone]

Thanks for the words Froyo and Smelt, i appreciate it. I had been by the sba website... boy it sure is a lot to look at.
I figured it would be a longshot - guys like me dont get free money easy!! heheh.
Guess i will keep plugging away like I have been, but it would be nice to actually get my place into a storefront or a building of its own instead of my basement.
Thanks again guys... [img]images/icons/smile.gif[/img]

[Carl Fuehrer]

I am using the SBA and the SCORE (service corp of retired executives) to write my business plan and make sure I hit everything legally.

[Smelt]

I've never used SBA, and I don't use my studio commercially (yet).

However, just to let you know... in my town, at our local college, is a small business development center (SBDC). It's a free class at night for, say, 6 weeks. They answer questions about the SBA, and help you to formulate your proposal. They probably have SBDC's all over the USA.

Click on www.sba.gov
and that should tell you where the local center is for you. Good luck!

[froyo]

Hello. Well silence you mention you have been running your business from your basement. That will definitely help show the money guys that you CAN actually run a business, and the SBA will definitely consider this as a plus. It depends however on how much money you were looking for and what for. If you are looking for someone to give you $250K plus or more to rent and setup a studio you may be out of luck. If you are looking for $100 or less to upgrade your business facilities, etc., you may have a good shot, because of your work business history.

Here is something else you may have not considered. You don't have to have a physical studio of your own necessarily. If you network with other studios in your town you can probably get some good rates. So you can sell your services and use theirr facilities. This is really probably the best approach to take. It involves the least financial risk, while it builds up a client base and business history for future credit and loan applications.

So people may hire "Graveleye's House of Hits" to record their album, which actually is recorded at Studio X. Believe me, Studio X will have no problem with this, they are getting money out of it. And although in a stricly technical sense you may be competitors, it usually is best to have a good working relationship with the others in town. In the long run, everybody benefits from it. Good luck.