In addition to the micro loan program, the U.S. Small Business Administration (SBA) offers a loan guarantee program for new businesses. These so-called 7(a) loans are named after section 7(a) of the Small Business Act.
With a 7(a) loan, the SBA promises to pay back a portion of the loan if the small business borrower defaults. They're designed for borrowers who wouldn't otherwise qualify for a standard commercial loan because of bad credit or little collateral.
Like micro loans, the SBA doesn't lend any money directly to the borrower. Instead, the SBA guarantees a portion of the loan. In exchange for this guarantee, the lender must adhere to rules about interest rates and other loan terms. Interest rates, for example, can't exceed a fixed number of points above the current Prime Rate.
Small Business Investment Centers (SBIC) are another SBA program to help finance small businesses. SBICs are privately held investment companies that adhere to SBA guidelines in exchange for SBA loan guarantees.
There are more than 400 SBICs in the United States, some specializing in start-ups and others focusing on certain industries or geographic areas [source: SBA]. SBICs can offer financing either through loans or as equity investments.