What is a Small Business?
The term‘small business’ refers to any type of business model that is privately owned and operated; additionally, all small businesses fall into the established federal size limitations that define what a small business is.
A small business, according to the Small Business Administration, employs fewer than 500 people; however, other forms of legislation that elucidate on such qualifications will define a small business as any operation with operate with fewer than 15 people—these size limitations will vary based on what industry the underlying small business operates out of. In addition to the employee base, a small business may be categorized or classified based on assets, gross volume of sales or its overall amount of production.
The general definitions and actions of a small business are regulated based on federal legislation. Typically, the Federal Government encourages the formation of small businesses to augment entrepreneurship and to entice innovation in the competitive market.
That being said, the Small Business Act is the predominant legislation that necessitated the aforementioned regulations and that instituted various practices and educational techniques to aid small businesses in carrying out their intended functions. The Small Business Act was the fundamental starting point of the Small Business Administration, which still serves as the critical intermediary and assisting body for all small business owners in the United States.
What is the Small Business Administration?
The Small Business Administration, which was the focus of the Small Business Act, is a government agency that is responsible for providing assistance and support to all small businesses operating in the United States.
Although the Small Business Administration does not provide loans directly to small business owners, the Administration, through the passing of the Small Business Act, acts as a guarantor between the borrowing party and the lending bank. The Small Business Administration also streamlines the ability to obtain such funding by facilitating the broker deal between a small business owner and a participating lender.
What is the Small Business Act?
The Small Business Act, which was passed in 1953, outlined the mission of the newly-created Small Business Administration. In addition to creating the Small Business Administration, the Small Business Act required the SBA to guarantee a fair percentage of public or government-structured contracts to various small business owners throughout the country.
The Small Business Act was passed to maintain and strengthen the United States’ economy by aiding, assisting, counseling and protecting the interests of small business owners and by providing funding to those individuals who were financially crippled by natural disasters.
The Small Business Act instituted through the creation of the SBA, an exchange of information and advice regarding the ability to obtain loans and the qualification standards revolving around government grants and government contracts for women, minorities and veterans.
The Small Business Act constructed the Small Business Administration to guarantee loans from other lenders and to counsel small business owners with everyday business operations.