Venture capital may be more abundant than it has been in years in Silicon Valley and other tech-heavy startup hubs, but for many small businesses, VC funding isn’t as common. The latest statistics from the U.S. Small Business Administration (SBA) say venture capitalists accounted for just two percent of financing received by small businesses in 2012. So how can small business owners compete with the well-funded innovations coming out of the startup world?

Small business loans accounted for 51 percent of total small business financing in the SBA study. That means your small business dreams of funding the Next Big Thing may lie in the hands of a banker.

Growth Driver: SBA-Backed Business Loans

Why would bankers take a chance on your big idea? Because the government has their back. The SBA insures small business loans in the same way the Federal Depository Insurance Company (FDIC) insures bank deposits.

“When you think about it, a lot of small businesses get started with some kind of guarantee. Sometimes it’s a family member, it’s a grandmother or an uncle. In this case, it’s Uncle Sam,” Ann Marie Mehlum, Associate Administrator of Capital Access at the SBA and the agency’s chief loan officer.

Mehlum knows firsthand what government backing does for small business loans. She spent 35 years in the banking sector in a variety of senior positions. Knowing the SBA would cover up to 75 percent of the potential loss made it easier to say yes to great ideas.

“[Sometimes] you know they’re going to be successful, but they just don’t quite meet your policy standards for lending out your depositors’ money,” Mehlum says. With SBA backing, everyone wins.

3 Tools for Getting Your Big Idea Funded

SBA-backed loans generally come in three forms. You’ll want to be familiar with each type and the associated paperwork before heading to your bank or credit union to finance the development of your big idea:

Your choice of loan or industry isn’t likely to matter in the approval process since the SBA backs all sorts of businesses. “There’s a healthy segment of manufacturing. There’s a healthy segment of tech. There’s a healthy segment of franchised businesses. Retail, hospitality—it’s really quite well diversified,” Mehlum says of the companies in the SBA’s loan portfolio.

Preparing to Pitch

Of course, there are no guarantees when it comes to pitching for funding from either VCs or bankers. Thankfully, the SBA has resources to increase your odds of success.

For example, the LINC database allows small business owners to find SBA-approved lenders in their area. The agency also works with SCORE, a nonprofit organization connecting experienced mentors with newer entrepreneurs.

In Metro Detroit, the SBA is taking this idea further via a pilot program called Getting to Yes. So far, 10 business owners have gone through the program’s intense mentoring with four receiving loan offers.

“The lenders were impressed,” says the SBA’s Catherine Gase, who helps administrate the program. One banker said the proposals were better than anything he’d seen in his career.

Getting to Yes participants Audie Brinker, owner of Nora Contracting, and her CFO Domenic Maiuri worked with an accountant at the local Small Business Development Center to practice and refine a pitch for growth capital. The result? Their credit line was boosted from $50,000 to $140,000 and a $50,000 Certificate of Deposit was released securing the line.

Making the effort to get educated is worth it, Mehlum says. VCs may be all the rage, but when it comes to backing the big ideas of small businesses, banks have the deepest pockets.

This should not be construed as financial advice. You should always confer with your financial consultant before making a financial decision for yourself or your company.

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