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Grands and funding are two ways a small business can get the money they need. These options might work for you, whether your business is just starting out or established and growing. The main difference between grants and funding is that grants don’t need to be paid back.
Whether you end up pursuing a grant, funding, or both, you need to understand how each option works.
What Are Small Business Grants?
Small business grants are money given to businesses to help them achieve their goal. The federal government and organizations provide small business grants.
Unlike small business loans, business grants don’t need to be paid back. To secure a grant, you will need to prove that you will correctly utilize the funds.
There’s usually an application process that involves several steps. Some companies use contests to determine who they will award a grant to.
To win a grant you need to demonstrate that your business will meet a unique need. You will need to prove that you have a business plan. Grant recipients are asked to show their progress and how they’re using the money. This process can involve meeting with grant administrators and providing financial reports.
The process of researching and applying for a grant can be intimidating. However, there are resources to help you along the way.
Types of Small Business Grants Available
There are a variety of sources such as government agencies, non-profit organizations, and corporations that give grants to business owners.
Federal
The federal government typically awards grants to businesses in sectors such as non-profit, education, and scientific research institutions.
You can find grants online and search through the database for options that various local government and federal agencies offer. The SBA is a popular government agency that provides grants as well.
State and Regional
State and regional government agencies also provide grants for small businesses. For example, there are six Economic Development Administration (EDA) offices that cover different parts of the country. Each EDA offers grants for companies in its region.
State government grants often focus on businesses that directly benefit the state’s residents. Examples include businesses involved in educational institutions, healthcare, and the arts.
Grants for Women
Women are less likely to seek business funding and are less likely to be approved. Grants aimed at women-owned small businesses can help. Grants for women come from the government, non-profits, and private companies.
What Is Small Business Funding?
Small business funding options include conventional bank loans, SBA loans, and alternative methods. There are some factors you want to consider when looking for funding. These factors include eligibility requirements, such as annual revenue and credit score. The funding terms, such as interest rates and timeframes, are also important.
Conventional Funding
If you receive a conventional loan, you’ll usually need to begin paying it back on a monthly basis with interest. Some banks offer quarterly or annual payments.
SBA Loans
SBA funding may be accessible for businesses that don’t qualify for traditional lenders’ financing solutions.
There are flexible options, with loan amounts ranging from $5,000 to $5 million. Another perk of SBA loans is that they’re guaranteed by the federal government.
Alternative Funding Methods
Crowdfunding is one alternative funding method that has become massively popular over the past few years.
A merchant cash advance (MCA) is another popular funding option. With an MCA, a provider gives you a cash advance in return for a percentage of future credit card sales.
Peer-to-peer lending is an option where a third-party lender acts as an intermediary between a borrower and an investor. The investor could be an individual or a bank. This option usually includes fast funding and an easy application process, however there is a high interest that comes with P2P lending.
