Federal Loans

• Contrary to what many people believe, the United States Small Business Administration (SBA) does not actually lend money out to people who are starting their own business, nor does it provide grants to start up a small business. Instead, the SBA works closely with local banks and other lenders to provide some protection to the lender. When a small business applies for a loan, it's actually getting a commercial loan that is set up with the SBA parameters. In turn, the SBA guarantees a portion of the loan. If the borrower defaults on the loan, the lender will not be out of the full amount of the money.
  
  

Business Loans

• Business loans are available from local banks, but they are becoming increasingly harder to get. When a bank is willing to lend money, some loans have default conditions added to them, which allows the bank to go after personal property in the event that you default on the loan.
  
  

Personal Loans

• Loans can be funded by family and friends, but these types of loans need to be handled correctly. The Internal Revenue Service needs to have loan terms clearly defined. If not, the IRS can actually set an interest rate for the loan---or it can declare that the loan was a gift and tax it accordingly.
  
  

Home Equity Loans

• An individual looking to get a loan who has some home equity available can use that equity to take out a loan to start a small business. The downside is that you can lose the home if you default on the loan.
  
  

Minority Loans

• Minority business owners looking for loans have several avenues available to them. One such funding source is the United States Department of Commerce Minority Business Development Agency (MBDA). The MBDA is designed specifically to help minority-owned businesses get capital, funding and training. In addition, the MBDA offers a wide range of tools created to help minority business owners get access to important information and resources. In addition to federal loan programs, individual states have programs in place for minority business owners, as well. In Massachusetts, for example, there is a loan program called BDC Capital for Women-Owned, Minority-Owned and Not-for-Profit Businesses.