Small Business Grant Explained
While you may have heard the old adage “nothing in life is free”, this doesn’t always apply — especially when it comes to federal money. A small business grant is just that — free money (typically a small amount) provided by the federal government for specific businesses. Unlike a traditional business loan, government grants for small businesses don’t need to be paid back. Another major difference between government grants and small business loans is that grants are typically very specific about how a business can use the money, whereas with business loans, lenders are much more flexible in its uses. After all, you’ll likely be paying fees, closing costs, and interest rates on a business loan, so a lender is much more willing to have fewer restrictions on what it can be used for. Since a small business grant is essentially free money, you don’t need to worry about things like interest rates, term lengths, or refinancing. All you need to focus on is qualifying, applying, and obtaining your grant. Whether you’re looking for small business grants for women, minority small business grants, or any other grants for small businesses, it’s worth checking to see if your business qualifies.
Applying for Business Grant
The application process for a small business grant is arduous, to say the least. Therefore, before diving in, it’s important to understand that not all businesses will qualify. Most are only available for specific types of businesses that the government wants to promote and encourage, such as educational organizations and nonprofits. In other words, small business grants typically target small businesses that serve the community and society. Some other criteria business owners must meet in order to qualify for a small business grant are to be located in the United States, employ less than 500 employees, and own over 50% of the business. Once you’ve done some research on whether or not your business qualifies for a business grant, the next step is to apply. If you visit grants.gov, they’ll walk you through the application process, from checking to see your eligibility to submit an application. Here’s an overview of how to get started:
- Research what small business grants are available.
- Check to see if your business qualifies.
- Search for a federal grant that fits your business.
- Register with grants.gov to apply.
- Submit your small business grant application.
- Track your submission status.
Alternative Funding to Business Grants
The application and approval process for small business grants is lengthy and even if your business qualifies, that doesn’t necessarily mean you’ll get approved. Luckily, there are plenty of alternative funding options for business grants that can help your new and burgeoning company grow.
The Small Business Administration (SBA) is a U.S. government agency that provides funding and support to small businesses. They offer various types of small business loan programs, each of which has its own set of requirements. These loans are partially backed by the SBA, which helps eliminate some of the financial risks for the lender issuing a loan. So, if a business owner is unable to pay back their loan, a portion of it will be covered by the SBA. These larger business loans typically range from $5,000 up to $5 million and have stricter requirements than other business loan types. A few qualifications include a minimum credit score of 640, at least 2 years in business, and a minimum of $100,000 in annual revenue.
Cash Advance Loans
These types of loans are a bit different than your traditional business loan. How it works is that a lender will provide your company with cash upfront in exchange for future profits. Over time, you’ll pay back that borrowed money plus a fee. Since cash advance loans aren’t technically a loan, merchant cash advance companies aren’t held to the same regulations as traditional loan lenders. As a result, you’ll find that they’re more expensive but easier to qualify for. Cash advance loan amounts typically range from $5,000 up to $250,000 and have looser qualifications. Lenders may require statements that validate past sales and a monthly credit card transaction minimum.
Business Line of Credit Loans
A business line of credit is another popular avenue for a business to receive financing and works similarly to a credit card. You borrow up to a certain amount and then pay interest only on the amount borrowed. It’s flexible and allows borrowers to draw and repay funds as they like while staying within their allowed credit limit. A business line of credit loan helps borrowers better manage their cash flow and pay off expenses that may arise, making it a flexible short-term solution. Amounts typically range from $1,000 up to $1 million and are on the lenient side when it comes to qualifications. Lenders may require a business history of 6 months to a year and have an annual revenue minimum of $50,0000. It’s important to note that qualifications will vary depending on the lender. If your business doesn’t quite meet the requirements of one lender, you may have better luck checking with another lender.
If your small business has any basis in philanthropic or educational work, a small business grant could help supply the nice monetary boost your business needs to grow and thrive. Just remember that applying for free federal money is a lengthy process and is only meant for specific industries. If your business needs quick cash or an alternative solution to a small business grant, there are plenty of online lenders providing a variety of small business loan options. It’s worth exploring these options to see what’s the best solution for your business.