An SBA loan, regardless of whether it is a direct loan from the SBA, or, more commonly, a bank loan guaranteed by the SBA, is essentially a bank loan. The benefit of it versus a traditional bank loan is the exchange rate. SBA rates are much less than traditional business loan rates.

In most cases, a guarantee of the SBA loan bank, the SBA guarantees 90 percent of the loan will be paid to the bank. Therefore, banks have a much lower risk than most of the loans, and are a little more flexible in offering these loans. However, the SBA usually requires the founders of the company to personally guarantee the loan, making it risky in case of collapse risk.

On the other hand, small business investment companies (SBICs) are privately organized companies that are licensed and regulated by the SBA. Small or emerging qualify for assistance from the SBIC program can receive principal and / or long-term loans from these companies. In essence, these companies offer their own capital, supplemented by federal funds, companies they finance.

Interestingly, U.S. benefit taxpayers SBIC program as tax revenues generated by successful SBIC investments have more than covered the cost of the program. Also, the program has created hundreds of thousands of jobs.

In summary, SBA and SBIC financing are viable alternatives to the financing of angel investors and venture capitalists and should be considered in the process of raising capital. Like Angel and venture capital financing, companies seeking SBA and SBIC financing need a strong management team and value proposition, and a very professional business plan and convincing in order to raise the capital they need.