Small Business Loans
Small Business Loans: Small businesses are a significant growth engine for the economy, both in terms of microeconomics and in terms of macroeconomics. A successful small business generates tax revenue, creates jobs, enables economic prosperity for its owners, and other benefits. But small businesses are also the business sector that needs credit the most. It is most difficult for it to provide sufficient collateral. The sector where most businesses close each year. Therefore, it is essential to know the options for small businesses loans in the banking sector, especially in the non-banking sector.
It is essential for small business loans in the non-banking market because there are more diverse options and conditions for obtaining financing in this market. Commercial banks usually require a certain amount of equity, high guarantees, business plans, and the like to get a loan. It is simply not possible for many small entrepreneurs to meet these requirements. Therefore, in many cases, banks refuse to provide loans to small businesses, which must find solutions elsewhere.
The State-Aided Small Business Assistance Fund
This is a government fund that operates within the Ministry of Industry, Trade, and Labor and is managed by the private finance company Tavor, whose purpose since its establishment in 2003 is to provide financing assistance to small businesses and start-up entrepreneurs. To establish new small businesses, the fund operates on a model of providing a guarantee to small businesses and entrepreneurs. It does not provide the money but provides about 70% of the guarantees needed for a loan provided by specific banks participating in the program.
The fund offers loans to small businesses on several tracks, with the main one being loans of up to USD 1.1 million, and there is a fast track of up to USD 100,000. The maximum amount is also determined by the size of the business’ turnover (businesses up to USD 22 million). The fund offers loans for up to five years, with a grace period of 5 months, an acceptable interest rate in the banking system, and a principal requirement of 20% equity of the total investment plan. For details, contact Tavor. In addition, MATI (Entrepreneurship Care Centers) can be mentioned as an additional solution for small business loans on behalf of a government body that provides various services and support to entrepreneurs and small businesses.
Philanthropic Funding Funds
In addition to the Small Business Assistance Fund, several philanthropic funds are also designed to address the small business sector and its perpetual credit crunch. These funds are based on donations and offer to small businesses loans in the model of a subsidized loan or providing a fund guarantee in favor of a loan from participating banks. It is even possible to get an interest-free loan, but only for a few businesses that meet the criteria. The central funds operating in this field are Koret Funds, Keren Shemesh for Young Entrepreneurs, Keren Natan, Keren Or, Keren Lahav, Agency Funds in cooperation with Jewish communities in the United States – with a fund for each large community focusing on different areas. These funds provide loans to small businesses from the periphery, entrepreneurs from various disadvantaged populations, or entrepreneurs and small businesses in general – each fund according to its definitions and goals.
The Banks
Despite what has been said about the standard difficulty of small businesses in getting bank financing, this is still a significant financial sector as it provides loans to certain small businesses. The loans are usually granted to existing and financially sound businesses, entrepreneurs with sufficient equity and collateral, or businesses that have presented a business plan that the credit committees at the banks see as promising. Many small businesses cannot get bank financing. In many cases, these are complex loan terms compared to the options available in the funds. Beyond these options of small business loans, you can apply for private loans from acquaintances and family, various private investors, credit card companies, and other financing solutions like factoring and check to discount
