Chapter 8.1, Problem 2R

To determine

To explain the ways through which the government can help businesses for funds.

Answer to Problem 2R

The 4 ways are mentioned as below:

Explanation of Solution

The role of government is important for the development of businesses as it provides not only funds facility to them but also play a major role in the economic growth by passing different laws for the upliftment of the businesses or by changing its expenditures and taxes.

The ways to get the fund facility are explained as below:

·         Loan guarantee program: In this program the government agencies provide the facility of loan guarantee to the small business which helps the businesses in the expansion.

·         SBA loan program: It is the largest loan program formed for the emerging entrepreneurs so that the lenders should work with such companies they feel risky with. SBA doesn’t make loans but it guarantees a part of the loan, 75%-85% depending upon the size of the loan made by the financial institutions to the budding entrepreneurs.

·         New markets tax credits: NMTC helps in the encouragement of investments to be made in the low-income areas of the region. It is used specially for real estate projects such as office space, retail locations, warehouses, etc.

·         Community development financial institutions: CDFI are there to support economic enhancement of the communities who belong to low income groups involving the businesses of the area. Example of CDFIs is Banks, credit unions, etc which help people for consumer loans or other financial services