-Rudy first student use reference on reply 

1. Select any two particular loan programs of your interest, what are the specific eligibility requirements for each? If you were an aspiring entrepreneur in need of start up capital, would you apply for an SBA loan? Why or why not?
   1. I believe I would first go with a microloan, I think just the size alone would steer me away from the 7(a) and 504 loans, both of these loans are for a much greater size of a loan which I am not looking into for a start-up or first year while I build my working capital. The requirements for a micro SBA loan are to be a for-profit business, do business in the US, have invested equity, and exhaust all other finance options. 
   2. I wouldn't like the idea of investors giving up equity in my business so because of that, I think I would go with crowd surfing to help build capital and to get the cash flow running through the business that I needed to grow without giving up a percentage to an investor for capital. 
2. Continuing with our SBA discussion, why do you think the federal government gets involved in guaranteeing small business loans? Do you agree or disagree with this policy position? Why or why not? What are the potential risks/rewards to the greater economy?
   1. The government gets involved with small businesses to help the new entrepreneur get started with a small business, there are many reasons for this like to generate more taxes, it is good for the growth of the economy, and it is good for the consumer to have multiple options for a product which helps competition that would hopefully create better service and products the consumer is looking to purchase.  
   2. I do think it is good to help Americans create small businesses, it helps create a market for better services and products for the consumer. It also allows for people to create a business for themselves without having to work for anyone but themselves. I think the rewards of a greater economy are most beneficial for everyone involved the new entrepreneur, banks, and customers, and far outweigh any negative risks for a greater economy. 

Resources

Microloans. (n.d.). Retrieved June 3, 2022, from https://www.sba.gov/funding-programs/loans/microloans

Milano, S. (2019, January 25). Role of government in promoting small business. Small Business - Chron.com. Retrieved June 3, 2022, from https://smallbusiness.chron.com/role-government-promoting-small-business-60657.html

Second student-maxim 

504 Loans – Is a long-term, fixed-rate financing of up to $5 million for major fixed assets (2022). The purpose for this loan is to be used for the construction of infrastructure or repair of it. I found it interesting that it limits the net income of the business to below $5 million for 2 years after submitting an application. The restriction of not using the funds for inventory purchase or working capital makes we wonder how that is enforced post funds being deposited.

Microloans – SBA designates loans that are less than 50K as microloans with the average listed as being 13K. What caught my attention is how it singles out not-for-profit childcare centers as a targeted group.

As an aspiring entrepreneur, I would apply for SBA funding. The reason is that more than likely I would not qualify for a traditional credit product at a banker or credit union. New businesses with short tenure or that have not started operations are considered high risk. Any capital needed would have to come from private investment or the use of personal credit. SBA programs offer alternative funding at better terms and reduced personal risk.

 2.

The reason for the government getting involved is the need to protect small businesses as an industry. The reality is that banks don’t make much money off of SMB lending in comparison to the cost of offering that type of service. The risk level doesn’t help considering the high percentage of failed businesses within the first 5 years according to this week's reading assignments. By having the government back these programs, it allows for small businesses to have access to the essential capital needed to start and survive until they are viable on their own. It also allows for certain industries to be targeted and nurtured within the US. The issue that can develop is the lack of incentive for financial institutions to create their own funding programs and as a result, reliance on only SBA lending for startups and small businesses.

Reference

504 Loans. SBA U.S. Small Business Administration. (n.d.). Retrived June 2, 2022, from https://www.sba.gov/funding-programs/loans

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