Starting a bookstore can be profitable -- particularly those serving niche markets. Federal grants, however, are not viable financing options. According to the U.S. Minority Business Development Agency, the federal government does not award grants for business start-ups and expansions. The U.S. Small Business Administration, in contrast, offers real-world solutions to bookstore financing through loan guarantees that help you get loans from commercial lenders.
SBA does not make loans direct to borrowers. It guarantees repayment of portions of loans that SBA will repay to lenders in the event of borrower default. SBA works through a network of “Certified” and “Preferred” Lenders. SBA Certified Lenders process loan applications but do not make the final loan approval decisions. SBA has final approval authority. SBA Preferred Lenders, in contrast, offer one-stop, expedited service because they have authority to approve loans independent of SBA supervision.
You start the process by collecting all of the information required to complete the SBA loan application. You should do this before you visit a lender in the SBA network. SBA provides a checklist of information the lender requires for the loan application on its website. You can also get a list of SBA lenders near you by contacting your local SBA office.
SBA offers a variety of loan programs tailored to meet the unique needs of individual borrowers. Accordingly, SBA recommends that you study the different loan programs on its website to determine your qualifications. You may qualify for the 7(a) Loan Program if you plan to operate in a rural area or in an underserved community. The Microloan Program is particularly user-friendly. The maximum loan is $50,000, which you can use for practically any legitimate business purpose except the purchase of real estate and the repayment of existing debt.
SBA is not your only option for financing a bookstore startup. SBA provides a useful search tool on its website that identifies public and private sector financing programs in your area for which you may qualify. Just select the options that apply to your business and hit the search button. Presto! You are presented with a list of programs and agencies in your community that may have funds for your business. Do not expect to find any private foundation grants on the list of prospective funding sources, however. Like government agencies, private foundations do not award grants to commercial businesses either. Foundations face severe penalties from the Internal Revenue for awarding grants that fail to meet the IRS criteria of “charitable” and “tax-exempt” purposes.
Competing with the big-box and online booksellers is a tricky proposition for most small retail bookstores. You can maximize your chances for success through differentiation such as serving a niche market or by providing unique events and/or services. A good way to get started is to get the advice of an expert in the book-selling field. Have that person help develop a detailed business plan to follow.