Introduction to Finance

Government Financing Assistance for 
Small Businesses
Small businesses can seek fi nancing help from both the federal 
and state or from local levels. The Small Business Administra-
tion (SBA) was created in 1953 by the federal government. The 
SBA provides fi nancial assistance to small fi rms that are unable to 
obtain loans from private lenders at reasonable terms and interest 
costs. We discuss the SBA in greater detail in Chapter 16.
Small business investment companies (SBICs) are chartered 
and regulated by the SBA. SBICs help fi nance small businesses by 
making both equity investments and loans. SBICs get their funds 
(to be lent or invested in small businesses) from privately invested 
capital and long-term bonds purchased or guaranteed by the SBA. 
These bonds typically have ten-year maturities. A small business 
is currently defi ned as a fi rm with less than $6 million in net worth 
or net income of less than $2 million.
At the state and local level, there also are possible sources 
of fi nancing help for small businesses. For example, most states 
have Small Business Development Centers (SBDCs) that can 
help small businesses fi nd sources of fi nancing. Small busi-
nesses also may fi nd sources of fi nancing help by contacting their 
state’s Department of Economic Development or Department of 
Commerce.
Small Business Practice

---

110
C H A PT E R 5 Policy Makers and the Money Supply
effi
ciently manages these dynamic aspects of money and credit, while the Treasury largely 
limits its actions to taxing, borrowing, paying bills, and refunding maturing obligations. The 
Treasury carries out these functions with as little interference with the conduct of monetary 
aff airs as possible. This is no small challenge.
Managing the Treasury’s Cash Balances
Treasury operations involve spending over $3 trillion a year. It is necessary to maintain a large 
cash balance, since Treasury receipts and payments do not occur on a regular basis throughout 
the year. This makes it critical for the Treasury to handle its cash balances in such a way that it 
will not create undesirable periods of credit ease or tightness. To aff ect bank reserves as little 
as possible, the Treasury has developed detailed procedures for handling its cash balances.