Small Business Grant Vs Business Loan
Although a small business grant and loan are both ways to get funds for your business, they operate differently. A small business loan, unlike a small business grant, has to be repaid, plus interest and any fees a lender charges.
The business loan application process also differs. When you apply for a small business loan, a lender normally reviews your personal and business credit scores to determine whether you qualify. A grantor, on the other hand, doesnt check your credit since it doesnt expect repayment.
In addition, when you apply for a business loan, youll likely receive funds faster than applying for a grant, provided you qualify. For example, some lenders can approve qualified applicants on the same business day and disburse funds within a few days. However, if you apply for a federal grant, it can take up to six months for a grantor to make a decision.
Looking For Funding Find Out How To Finance Your Startup Without A Traditional Bank
- Venture capitalists can provide funding, networking and professional guidance to launch your business rapidly.
- Generally, angel investors dont ask for any company shares or claim to be stakeholders of your business.
- Businesses focused on science or research may receive grants from the government.
- This article is for small business owners who need information on alternatives to traditional bank loans.
Starting your own company can be a daunting but rewarding process. While a great business plan is crucial for founders, financing is one of the most important elements a company needs to succeed.
However, financing a startup or small business can be a difficult, drawn-out process, especially for those with poor credit. While there is no minimum credit score you must have to get a business loan, traditional lenders have a range they usually consider acceptable.
If you have a low credit score and no collateral to offer, consider an alternative loan. In this article, we break down 11 small business funding options, examine the benefits of alternative lending and provide tips on how to finance your business.
Small Business Grants: Here Are 23 You Can Apply For In 2022
Its a difficult time for small businesses affected by the coronavirus outbreak. However, governments at the local, state, and federal levels, as well as private companies may give out grants. Researching and applying for funding requires time and effort, but if you are successful in getting a grant, everything is worthwhile. Here is a breakdown of small business grants to get you started.
Author: Dale Cudmore
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Who doesnt like free money? Thats what small business grants are, right?
It could help you pay salaries, buy stock, or reach new customers.
While grants are free in the sense that you dont have to pay them back, theyre not handouts.
You cant just go to a website and ask for one small business grant please, and expect to get it.
You must apply for a grant, which can take a decent amount of work and effort. Then, youre up against other small businesses that also want the grant. Its common for even small grants to get hundreds of applicants. That said, a list of small business grants is a good starting point.
Ive compiled a list of 23 small business grants, but before I get to that, there are 3 more things you should understand:
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How Much Can I Get For A Startup Business Loan
Startup business loans typically range from $1,000 to $250,000. However, the loan amount you receive depends on your and the business creditworthiness. Most lenders require businesses to have been in operation for at least six months to two years and meet minimum annual revenue requirements. Be sure to check with your desired lender to ensure your startup is eligible.
Wait To See If You Get The Grant
While we know you want to hear back about your application right away, you probably wont get an answer for a while.
Most grants get quite a few applicants. And the more broad the grant requirements, the more applicants theyre likely to get.
Because so many business owners apply, it can take a long time to find out whether or not you won the grant. After all, someone has to review all those applications.
So settle in for a long wait. But do make sure you check your email and voicemail regularly to make sure you dont miss any important communications about the grantlike telling you that you won.
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Look For Grants Within Your Industry
A lot of small business grants are industry specific, so it can help narrow down your search if you focus on organizations and research institutions within your particular industry. Focusing on one industry also builds buzz around your business, and can help build connections with industry figures who may be able to offer guidance and investment opportunities.
Pros Of Small Business Grants
The number-one pro when using small business grants is they do not need to be repaid. This is welcome news for many small businesses that may have financing difficulties that make it challenging for them to repay a traditional business loan.
Another pro is that information about the availability of small business grants is relatively easy to find online. There are a number of free resources that can point you in the direction of the many grants that are available:
- SBA provides limited grant funding to eligible community organizations to promote entrepreneurship and certain businesses in specific industries.
- Grants.gov offers information on federal small business grants.
- Small Business Innovation Research Program is a federal funding program available to small businesses focusing on federal innovation and research.
- Small Business Technology Transfer Program is focused on research and development.
- National Institutes of Health Research GrantPrograms offers independent scientific research grants, including the very popular R-series grants, through the National Institute of Allergy and Infectious Diseases and other institutes and centers.
Most generally if you are qualified for one grant program, the odds are that you can qualify for others as well.
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Why Might Small Businesses Seek Alternative Financing
There are several reasons why small business owners might turn to business loan alternatives. Here are three of the most common.
- Lower credit requirements: Traditional banks are almost certain to decline loans to borrowers with credit scores below a certain threshold that, though different for each loan provider, is often between 600 and 650.
- Easier qualification: Not all small business owners meet the additional requirements to apply and be approved for traditional loans. In these cases, business loan alternatives are helpful.
- Faster approval: Traditional bank loans can take weeks to be approved, whereas some business loan alternatives give you access to funding in as little as one week.
Alternatives To Small Business Grants
If you dont have the patience to apply for a small business grant and wait to see if youve been awarded it, look to other options to get the financing you need.
There are plenty of small business loans available, no matter what your credit profile. If your business is established and you have excellent credit, you might qualify for a bank or SBA loan with lower interest rates. If you want access to some cash now and more later, look for a line of credit.
If youre working to build your credit, you may be able to get a merchant cash advance or invoice financing. And if youre just looking for a way to purchase what your business needs, there are plenty of small business credit cards available to you.
This article was originally written on November 19, 2019 and updated on June 13, 2022.
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Commercial Real Estate Loans
Commercial real estate loans are similar to home mortgages but finance retail property purchases or renovation. To qualify for this loan, a business must occupy at least 51% of the financed property. Commercial real estate loans are available from traditional banks, retail, and online lenders. The general loan-to-value ratio ranges from 60% to 80%, which means you will have to invest the remainder of your funds. For a commercial real estate loan, the property being financed could serve as collateral on the commercial loan. A potential lender would review the business credit score, the propertys documentation, and your personal and business financial information.
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Ohio Small Business Grants
With more than $25,414.00 million dollars in grants and additional local government funding sources of $19,115.00 million dollars, the majority of the federal budget in government grants is put into the business sector every year as small businesses and large corporations are the foundation of the economic growth in Ohio. There are 192,796 business establishments in the state of Ohio, and they break down to the following:
Ohio Business Sector Breakdown by Size:
- 104,867 registered businesses in Ohio have 0 to 4 employees. People who work at home with sole proprietorship are included in this breakdown.
- 36,383 registered businesses in Ohio have 5 to 9 employees.
- 22,898 registered businesses in Ohio have 10-19 employees.
- 20,163 registered businesses in Ohio have 20-99 employees.
- 4,788 registered businesses in Ohio have 100 to 499 employees.
- Over 3,697 registered businesses in Ohio have over 500 employees.
Ohio Business Sector Breakdown in Service Industries:
- 24,790 registered businesses in Ohio are in the Professional, Scientific and Technical Services sector.
- 14,083 registered businesses in Ohio are in the Administrative, Support, Waste Management, and Remediation Services sector.
- 23,525 registered businesses in Ohio are in the Accommodation and Food Services sector.
- More than 28,769 registered businesses in Ohio are also service orientated businesses but are not categorized to the above sectors.
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Why Is It Difficult For Small Businesses To Get Loans From Banks
Capital is difficult for small businesses to access for several reasons. Its not that banks are against lending to small businesses they want to but traditional financial institutions have an outdated, labor-intensive lending process and regulations that are unfavorable to local shops and small organizations.
The difficulty of accessing capital is exacerbated because many small businesses applying for loans are new, and banks typically want to see at least a five-year profile of a healthy business before extending an offer.
How To Get Grants For A Small Business
Research, research, research! There are tons of grants out there for the asking, but you need to do your research. Most grants have very stringent requirements that must be met . If you do your research, you will find a number of grants up for grabs. However, you must make sure your small business meets their oftentimes strict eligibility requirements.
One thing to note is that tech companies have a slight advantage when it comes to grants. States and the federal government offer grants through the federal governmentâs Small Business Innovation Research and also through the Small Business Technology Transfer programs. For more information on either of these two programs, visit www.sbir.gov or www.sba.gov. Also, businesses that are issued government grants are often asked to repay the government in other ways other than with money. For instance, if the company is doing research and development, the government may require that findings from any research using grant money be made available for use by local, state or federal government authorities.
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Good For: Technology Companies
The federal research SBIR grant program is for entrepreneurs focused on innovations in technology that have the potential for commercialization. You can check its funding opportunities here. Focus areas from the past include clean and safe water, homeland security, land revitalization, green construction, advancement of health care, and more.
What Is A Vetrepreneur
A Vetrepreneur is a military veteran who owns and operates a business. Veterans are eligible for several financing opportunities to start or grow a business.
The Small Business Administration prioritizes veteran entrepreneurship through its multiple small business loan programs for men and women veterans. However, veterans can also benefit from several other SBA financing options made for any business owner. Veteran entrepreneurs may receive financial assistance, entrepreneurship training, and other forms of small business help through private organizations and other government programs.
Veterans own 9.1% of all United States businesses. Each veteran small business owner leaves a lasting footprint on our countrys culture. The VA, SBA, and other organizations show their gratitude to former service members who have helped sustain the economy through their businesses with each loan program targeting veteran business owners.
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How Do I Get A Startup Business Loan With Bad Credit
Without at least two years time in business and strong revenues, lenders will have to rely on your credit scores to help determine their level of risk. A business owner with bad credit will find it tough to qualify for almost any loan. However, many of the microloan and crowdfunding options are worth exploring, as they may be available to business owners with poor credit or no credit.
Military Reservist Economic Injury Disaster Loan Program
The MREIDL program, also known as a military reservist loan, pays a maximum amount of $2 million to businesses with military reservist essential employees. If a military reservist at your company is also an essential employee who gets called to active duty, you may be eligible for help through this program to assist with operating costs. The funds are not available to pay or refinance debt, or to cover income or lost profits.
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Fuel Growth In Your Startup With A Small Business Grant
The first few months of running a business are often the most challenging. It takes time for a business to become profitable, but costs can add up quickly.
Small business grant programs can make a world of difference for a new small business owner. Not only do they provide a vital injection of funds, but they can also help to establish connections in your industry and build buzz around your product.
If your business has the potential to innovate your industry and build new technologies to serve the public good, chances are youre a great candidate for a small business grant.
National Association For The Self
NASE gives veterans and non-veterans business grants of up to $4,000 to help them start and grow their businesses. You must be a member of NASE to apply, and only those eligible, like veteran members and annual members, may apply immediately after joining. However, monthly members must wait at least 90 days after becoming a member to apply. Additionally, business owners must prove an identifiable business need that the grant can help and have a clear business plan in place to be approved.
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Dont Miss The Opportunity
There are many small business grants out there if youre willing to work for them.
If you want to win them, youll need to take it seriously and beat out the competition. Dont be afraid to apply to smaller ones, because they will often have less competition than the grants for high awards.
I strongly encourage you to also visit local small business associations, and pursue other means of small business financing if you need money urgently.
If you still have any questions about grants, please leave a comment and Ill try to answer them.
Banks & Credit Unions
Traditional banks and credit unions typically offer a limited range of small business loans, including those backed by the SBA. While traditional banks often have tighter borrowing standards than online lenders, small business owners may still find it easier to qualify at an institution where they have an existing banking relationship.
Not only will the bank already have the business financial statements on file, but it may also be easier to get approved with a local lender who is familiar with your operation.
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Economic Development Incentive Fund
As part of the $50 million funds provided by the Prince Georges County Economic Development Corporation, the County will expand its commercial tax base and promote major development and redevelopment opportunities, transit-oriented development, job retention, attraction, and the growth of key sectors.
Land acquisition, construction and improvements, equipment acquisition, and working capital are some eligible uses of the proceeds. Detailed information regarding the program is available here.
Resources For Economic Support
Review your financials and cash flow. How long can you make it through in case of a quarantine, lost wages, employee absenteeism . What do you need to bridge the gap? Plan on a 6-8 month drop in revenues. Map out cash flow now.
Get a credit line approved now. You don’t have to use it. But you’ll have it when you need it.
Aggressively pursue accounts receivables. Engage your lenders .
Slash your overhead. If you’re worried about losing customers or employees due to sickness, school closures or possible quarantines, cut the things you don’t HAVE to spend your money on.
Communicate, Communicate, Communicate and Get Online! Keep staff and customers informed and up-to-date on your operations. It’s important for businesses to keep in touch with customers to help maintain them through this incident. Let them know what steps you are taking to ensure a safe and clean establishment what your open hours are and how to communicate with you use email auto-reply with answers to frequently asked questions to help your customers get information quickly offer alternative methods of good deliveries .
Use online platforms, like Facebook and your website, to inform customers of your operating status and how to purchase your products or services. Communicate this information through direct email to customers and through social media such as Twitter. Make sure you have a . Postal mail might be a way for your message to get customers’ attention who are being bombarded with emails.
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