This information is from the latest Quarterly Lending Bulletin published by the SBA a few days ago.

This problem could become an even larger stumbling block to future economic growth if demand for goods and services from small businesses increases suddenly and those small businesses have no resources to expand their capabilities. Apparently no one is thinking about this possibility.

Although it is too late for many small businesses (who are gone), there are still many of those left, asking the question; “Now that the banks and big businesses are bailed out, when are small businesses going to be bailed out?”

Apparently bailouts work well, according to the latest news from The NY Times:

• Wells Fargo just posted a 21% rise in it’s third-quarter earnings—$4.1 Billion.

• Citigroup reported a third-quarter rise in earnings of 74% —$3.8 Billion. This is the seventh-straight quarterly rise in profits for Citigroup.

Couple the bank’s rise in profits with the auto industry’s rise in profits and it becomes obvious that bailouts work for big business. Too bad the government only wants to take from small business.

Could it be because there is a dearth of small business experience in Washington? Obama’s Cabinet contains the lowest number of private sector people since records started with Teddy Roosevelt (Forbes).

Worse yet–the vast majority of lawmakers in Washington are “professional bureaucrats” who wouldn’t know how to run a small business if there life depended on it.

What do you think this scenario holds for your small business?

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The Reality

That was a very naïve comment, and here’s why: According to the Kauffman Foundation, there were over 6.5 new businesses started in the U.S. during 2010. Also, according to PriceWaterhouseCoopers reports, there were 3,277 venture capital deals made during 2010.  Not very good odds.

So, where did the funding for startups come from to start the remainder of the 6.5 million new businesses?

Angel Investors

Certainly some financing came from Angel Investors, but their requirements are not that much different from the VCs. Angels usually precede VCs and get a company started before the VC becomes involved.

The data is elusive, but It appears that (certified) Angel investors may not have made substantially more deals than the VCs did. Even if they made 10 times as many deals as the VCs, that would only account for about one-half of one percent of the total startups for 2010.

Angel investors are actively coming together as “groups” that act on new venture deals as investing partners, just like the Venture Capitalists. The lone wolf angel investor is a dying breed.

Banks

Of course, no bank is going to provide funding for startups (other than, perhaps, a personal loan to the entrepreneur…if they have substantial collateral). There is also no indication that banks will begin more aggressive lending to businesses, especially small businesses, anytime in the foreseeable future.

Banks certainly are not the answer now, or any time soon.

SBA Loans

We need to remember that SBA loans are made by banks, not the government. SBA loans are only partially guaranteed by the government, and I have been told by many bankers that their SBA loans must meet the same borrower requirements as a non-SBA loan. Therefore, in reality, the SBA is not the answer either.

Grants

There is no such thing as a U.S. government grant available for the purpose of starting a for-profit company. There can be local “incentives” like tax postponement, subsidized property or facilities, etc., but finding grant money to start a for-profit business in the U.S. is like finding the Holy Grail.

While many of the economically emerging countries are offering strong incentives to entice American entrepreneurs to start businesses in their country, the U.S. seems paralyzed about doing anything to keep those businesses here, let alone expand our own business community.

Who’s Left?

Well, that still leaves something over 6 million new startup businesses without any realistic form of  outside funding. That means the primary sources of funding for startups available in the U.S. are: (1) the entrepreneur’s personal borrowing capacity, (2) family, and (3) friends.

Unfortunately, for nearly all of the over 6.5 million new U.S. businesses that will start up during 2011, the only investor decision that can be made is which family member or friend to approach first. Very sad.

How did you fund your startup business?

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Superior Financial Group makes small business loans that are guaranteed through the SBA. They loan amounts from $5,000 to $25,000, with interest rates as low as 4.25% over the Wall Street Journal published prime rate. The current interest rate starts at 7.50% and increases slightly with smaller loan amounts.

To qualify for this lending program, you need to meet the following criteria:

• Your business can be either a startup or already operating, but it must have a business checking account and a good credit standing. A nice feature of these programs is that no collateral is required.

• You also must have a good personal credit standing.

• You must be a member of Sam’s Club (to receive the low interest rate and loan fee discount).

• You must need a minimum of $5,000, and a maximum of $25,000 for operating capital for your business.

• You must be a “for profit” business.

To investigate this loan program further, go to the Sam’s Club web site and click on “Services”, then on SBA Small Business Loans. Follow the instructions and apply online, or by phone. The lender will process your request quickly and you will hear back within a day or two. Good luck!

The SBA guarantees these small loans through the Patriot Express and Community Express (“Community Reinvestment Act”) programs. You can learn more about these, and other, SBA loan programs through this special report.

In the event an SBA loan does not work out for you, there are other small business financing options—check out this report on Creative Business Financing. There are many ways to finance a business…it just takes creativity and perseverance.

In fact, if you have enough passion and perseverance, you could even Bootstrap your business. Be aware however, that this method only works for the highly determined person who can discipline themselves through the process. Here is a report on a typical scenario for Bootstrapping.

I would be interested in hearing from anyone who has obtained a business loan other than through a bank.

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Here are three of the most popular:

• Patriot Express Pilot Loan—This program is for all veterans and active-duty military people, including their spouses. However, this is a SBA “guaranteed” loan, which means the loan is made through a bank—thus requiring that you have a good credit history. Vets can borrow up to $500,000 with 85 percent of their loan guaranteed by the SBA. And since it is an “Express” loan, you will know within one day if you are approved. For more information, call your local SBA office or visit  http://www.sba.gov/vets

• Military Reservist Economic Injury Disaster Loan—This special loan is for the small business that has a key employee, or the owner, called up for active duty. The concept is to loan the business additional operating money to help it either get through the period of absence, or recover from the temporary loss of a key individual. You have a year after the return of the key employee to apply for the loan, or you can apply immediately upon the notice of call-up (a good idea if it is the business owner). For more information, call your local SBA office or visit http://www.sba.gov/vets

• Veterans Transition Franchise Initiative—This is not a loan program; it is a government-sponsored program that gives ten to 20 percent off franchise fees at almost 400 different franchising companies. This program works well for the vet who either has the additional money, or can raise it, to cover the remainder of the franchise fee, plus any operating capital requirements, and who prefers to work within the structured franchise model. For more information, visit http://www.vetfran.com

These are special programs set up to help veterans returning from active duty, or while on active duty, so don’t hesitate to take advantage of them if entrepreneurship is in your future.