The federal government recognizes that in order for life in the United States to run smoothly, people must be able to borrow money. While the private sector takes care of this need to a certain extent, private lenders are in the business of making a profit, and thus, they lend only to those who offer the least risk.

Unfortunately, that leaves a lot of people out. Thus, the government has been able to step in and guarantee loans to people who otherwise would not be able to borrow. In most cases, it is still private banks and other financial institutions that are doing the lending. But the government is taking the risk, by offering to cover the loans in case the borrowers cannot repay them. The end result is that the economy runs smoothly, and all people benefit.

There are three main areas in which the government guarantees loans. It offers loans to small businesses, to potential home buyers, and to those pursuing higher education.

Business Loans

Small businesses are very important to the economy of the United States, because the vast majority of businesses in the country have fewer than ten employees. Government loans allow experienced business people to follow their dreams, to set up a company that will fill a need, or to expand an existing business so that it can better serve the needs of its customers.

Sometimes these businesses go on to become giants in their field. Companies such as Nike, Apple Computer, Compaq Computer, and Federal Express have all taken advantage of loans and other programs sponsored by the U.S. Small Business Administration.

Loans for Home Buyers

Owning a home has become part of the American dream, and millions of home buyers have been able to make their purchases with the help of various federal loan programs. There is a great deal of pride associated with home ownership, and neighborhoods occupied by home owners are generally better maintained and safer than neighborhoods where the majority of residents are renters. Additionally, the purchase of a first, relatively small home allows the buyer to build on equity in the home, so that the first home can be sold at a profit in order to purchase a larger, more expensive home. Not only does this improve the life of the home owner, it keeps the economy growing as well.

Loans for Higher Education

Those who are just starting out are least able to afford the bills associated with post-secondary education. Thus, the government has come up with a variety of programs for those attending college or trade schools to get an education, then pay for it after they have graduated and have taken a good job.