If your small business is struggling, you should know that there are many organizations that offer free and low-cost help to start or grow a business. But how are you supposed to know which one will help you with the specific challenge you’re facing? Three organizations you should know are the U.S. Small Business Administration (SBA), Small Business Development Centers (SBDCs), and SCORE. All three offer resources and support to small and mid-size businesses, but the services they offer are slightly different.
Small Business Administration
SBA stands for the U.S. Small Business Administration, a federal agency created by a law called the Small Business Act, which was passed in 1953. It has state and regional offices. It administers business loans that are guaranteed by the government, helps small businesses get government contracts, provides educational resources on many topics, and works with other organizations to encourage small businesses nationwide.
The SBA offers loans for business, but, with the exception of disaster loans, it doesn’t actually lend the money itself, but instead guarantees the loans made by partner lenders. 7(a) loans are the most versatile: they can be used to get working capital, equipment, or to refinance debt, up to $5 million. Microloans are short-term and for small amounts (up to $50,000). CDC/504 loans are for the purchase of commercial property, buildings, and equipment. Disaster loans are given directly by the SBA.
The SBA helps the federal government award 23% of all government contracts to small businesses. It can certify businesses as women-owned, service-disabled veteran-owned, or disadvantaged. Unfortunately, the SBA doesn’t offer grants to startups in most industries, but it does help coordinate America’s Seed Fund, which provides SBIR and STTR grants for qualified technology and research businesses. You can find online workshops, articles and webinars on the SBA’s website. Most are free, though a few local workshops might charge you a fee.
SCORE and the Small Business Development Center (SBDC)
There are nearly 1,000 Small Business Development Centers (SBDCs) across the U.S. and its territories. SBDCs provide no-cost consulting and no or low-cost training to both new and existing businesses. They’re typically hosted by universities, colleges, state economic development agencies or private partners, and are funded in part by Congress through partnership with the Small Business Administration (SBA). SBDCs can help with business plans, market research, financial projections and budgeting, regulatory compliance and licensing, international trade, marketing, and access to capital strategies.
The SBDC can’t offer legal advice, but one of its consultants might be able to give you a heads-up about regulations and licensing so you know where to find the answers. It’s a good place to go when you need a detailed business plan, complete with financial projections, for a bank or investor, when planning to expand, or need to do market research; it may have access to market research tools; it often knows local microlenders or grants. The trainings are often free, as well.
SCORE is a nonprofit and a partner of the SBA. It offers free, confidential mentoring in person or by e-mail, phone, or video in all 50 states and U.S. territories. It depends heavily on experienced business professionals to volunteer as mentors, so the quality of the service may vary depending on the location and the mentors available there. SCORE also offers templates for business plans and budgets, along with webinars, workshops, online courses, and a how-to library. You can stay with a SCORE mentor as long as you need.
The main difference between SCORE and the Small Business Development Center (SBDC) is that SBDC consultants generally earn their living helping small business owners, and take part in ongoing continuing education. SCORE mentors are volunteers who have had business experience, and have chosen to give back with their expertise. They can focus on specific industries or problems like HR or sales. If you want a personal mentoring relationship for as long as you need it, SCORE is the way to go. For assistance with specific issues, you’re more likely to work with an SBDC consultant.
Many Business Owners Take Advantage of All Three
The three groups often work together. The SBA provides the money for, and supervises, both SCORE and SBDCs. A SCORE mentor may refer you to the SBA to get information on loans; an SBDC consultant may refer you to a SCORE mentor for ongoing help. And you don’t have to pick one or the other; many business owners take advantage of all three at various stages.
Still, if you want to start with just one, a few tips. Pick SCORE if you just need to bounce your idea off of someone else - say you want to open a coffee shop but have never run a business before. A SCORE volunteer who once owned a restaurant can help you think through the location, suppliers, staffing, pricing, and so on. Choose an SBDC if you need a formal plan, such as to get a loan from your lender - for example, if you need $35,000 to expand your manufacturing facility, the consultant might help you with your business plan and market analysis.
Choose the SBA if you want to learn about financing. For example, if you’re running a landscaping business and you need $100,000 for equipment, but banks won’t lend without a guarantee, a 7(a) or 504 loan could be a good fit. Always remember that the SBA guarantees the loan, it doesn’t make it, except for disaster loans. Also choose the SBA if you want to pursue government contracts, or if you’ve been hit by a disaster: your store has been flooded, and you want to rebuild it with a low-interest disaster loan.
Here’s a typical progression, using all three: You start by talking to a SCORE mentor about your business idea, to work out a general plan. When you’re ready to pursue financing, you turn to an SBDC consultant for help with market research and a professional business plan. Then, with that in hand, you apply for an SBA-backed loan through one of the agency’s participating lenders. Keep working with your SCORE mentor as you develop the business, and go back to the SBDC when you’re ready to expand, stay compliant, or do more market research.
One caution if you’re carrying debt: SBA loans require acceptable credit; many programs need personal credit scores of 680 or higher, though exact requirements depend on your lender and the loan program. If your credit isn’t great, focus on improving both your business and personal credit while you build your company. SCORE’s mentoring is free, and SBDC consultants can help you learn about taxes but won’t do your tax returns or offer specific tax advice; they can connect you with tax professionals.
The basic goal of all three groups is the same — to help small businesses in the U.S. succeed.
