Government Grants and Loan Guarantees


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Group discussion notes about my opinion regarding Government Grants and Loan Guarantees at Full Sail U.

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Government Grants and Loan Guarantees

  1. 1. Jessica Northey CO5EBEGroup DiscussionGovernment Grants and Loan GuaranteesJuly 19, 2011
  2. 2. Jessica Northey CO5EBEExecutive SummaryGovernment Grants and Loans GuaranteesShould the government guarantee loans for small businesses that are missing thenecessary track record, assets, or other ingredients to obtain a commercial bank loan? In comparing the government spending behavior of guaranteed college loans to guaranteedbusiness loans we can see the similar patterns of behavior and can expect the government to have similardecisions about guaranteed loans no matter who they’re going to. Over the last several years thegovernment has continued to cut government spending in the education system. The government continuesto reduce it’s spending in 2011 for educational loans for college students. The problem is that for Pell Grants,Federal Work Study, Perkins Loan, and others, there is no guarantee that an education will provide agraduate with a successful career just as a guaranteed loan cannot guarantee the business will succeed wellenough to pay back the loans. (“Student aid alliance,” 2011) In my opinion, with the amount of graduatesworking at restaurants, I understand why the government would not view education as being successful. A small business owner expecting a guaranteed loan when they are missing the necessary trackrecord, assets or other necessary paperwork such as a business plan is a poor business decision. Manybusinesses are going bankrupt because of advancements in technologies in our changing world. A businessowner has to have an entrepreneurial mindset. If their credit will not allow a traditional bank loan, then theyshould ask the bank to loan against collateral or if there is none then at least have a solid plan of financialprojections and a list of potential clients. And even then, I do not think the government should guaranteeloans during this time in our economy. However, there are other options for funding a small business such asgrants, micro loans, and crowdsourced funding, which is when a large number of people each give a smallloan amount such as $25. This has become more popular online with sites such as Kiva at Page 1
  3. 3. Jessica Northey CO5EBEShould the government provide grants for Entrepreneurs starting new businesses? Yes, in some cases, if a person is eligible for any of the current grant programs that help oureconomy prosper in the long run then a loan and/or grant would be a wise investment. A case by casedecision based on current market trends, their business plan, and proof of potential clients are all greatreasons to consider approving someone for a grant. In contrast, someone with poor credit who has a longhistory of neglecting their credit, with no business plan, and no general direction other an idea and a requestshould not have the same privileges. Most government grants are for businesses who have technologicalinnovations that contributes to our country in a positive way or that makes a difference their community in apositive way. Here are a few examples of options for capital:• The New Markets Venture Capital Companies. “A developmental venture capital program designed to promote economic development and the creation of wealth and job opportunities in low-income geographic areas and among individuals living in such areas.”• Micro Loan Program / Micro financing. Programs that “provide very small loans to start-up, newly established, or growing small business concerns. Under this program, SBA (Small Business Association), makes funds available to non-profit community based lenders (micro lender intermediaries) which in turn, make loans to eligible borrowers in amounts up to a maximum of $350,000, however; the average size loan is $13,000. The credit decisions are based on local level, most cases collateral is required and personal guarantee of the business owner.” (“Microloan program,” )• Small business grants. Research what you’re eligible for from the government for grants for innovative technologies and products/services that help the world become a better place has been and will always be supported by the government. If you’re looking for a hand out, be willing to use your brain to give something back to your community. For example, I found a business grant contest that I am eligible to apply for a business grant to win a cash prize of $1,000 and $1,500 worth of free promotional swag to promote my company. The winner goes to the person with the most innovative business idea. ("$42.000 give-away contest," ) The reward needs to always go to those who deserve it because they will value it more and a return of investment is more likely. Page 2
  4. 4. Jessica Northey CO5EBEWhat benefits do we, as a nation of taxpayers, receive from such grants and loanguarantees? Unfortunately, cuts on education option for the poor in addition to not providing loans for those withbad credit and no collateral are in a challenging situation. “The NASFAA, National Association of StudentFinancial Aid Administrators, joined almost 80 other higher education organizations that make up the StudentAid Alliance to request spending levels for federal student aid programs for the fiscal year (FY) 2012 budgetand urges Congress to restore funding for these programs to ensure the U.S. can compete in the futureglobal economy. ‘Our members recognize that all options should be on the table in addressing the federal deficit,’ the Alliance request states. ‘But cutting back on programs that will strengthen our future work force is counterproductive to sparking innovation, increasing employment and stimulating business growth.’” (“Student aid alliance,” 2011) For the government it is about the bottom line of today and for the American people we areconcerned about our future. We each must understand that we must find it within ourselves to work hard forwhat we want in our lives instead of expecting handouts. It is difficult to understand bail outs being good forthe economy but it really is only a bandaid. The best situation is to never go into debt and if you cannotafford a higher education, we are in the Information Age where the public library has free Internet access anda wealth of knowledge in books. And in your studies about entrepreneurialism any one can find that smallbusiness owners stimulate the economy and create new job growth. However, a majority of businesses failwithin the first two years. I suggest government spending in more entrepreneurial tracks in high school levels. Page 3
  5. 5. Jessica Northey CO5EBEReferences Student aid alliance issues fy 2012 budget request for aid programs. (2011). Retrieved from http:// Student_Aid_Alliance_Issues_FY_2012_Budget_Request_for_Aid_Programs.aspx Microloan program. (n.d.). Retrieved from $42.000 give-away contest for small businesses. (n.d.). Retrieved from http:// Page 4