Small Business Funding vs. Small Business Grants: How to Choose

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SMALL BUSINESS FUNDING VS. SMALL BUSINESS GRANTS
HOW TO CHOOSE
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Small business funding and grants are the two
most common ways for small business owners to
secure funding. The key difference between these
two options is that grants dont need to be
repaid making it a more involved application
process for small business grants. Before you
decide to pursue a grant or funding, its vital
to understand what are these, how they work and
how to secure them.
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What Is Small Business Funding?
Small business funding options include
traditional loans, SBA loans, and alternative
lending options. These loans require payment and
it can be weekly, monthly, a one-time payment,
and in certain options a percentage of your
profits. Before applying for business funding
programs, make sure you are eligible by
considering factors like your annual revenue,
time in business and credit score.
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Types of Small Business Funding Available
Apart from traditional bank loans, there are
other funding options available as well such as
The SBA, Alternative Lending including online
business loans, crowdfunding, and merchant cash
advances.
Conventional Bank Loans
Small Business Administration (SBA) Loans
Alternative Lending
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Conventional Bank Loans
Conventional bank loans are the prime source of
funding for small businesses that you will repay
on a monthly basis plus interest. Some banks
offer quarterly or annual payments as well.
Getting conventional funding is tough. It
involves strict qualification criteria with
requirements like higher annual revenue of
250,000, a great credit score of 680 or higher,
and at least three years of time in business.
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Small Business Administration (SBA) Loans
Small Business Administration also provides
grants and loan programs for small businesses
that dont qualify for traditional funding. The
SBA loan programs are the most sought-after
financing options with higher loan amounts,
flexible repayment terms, and lower interest
rates. Another important thing is that the
federal government guarantees SBA loans. However,
in order to qualify for SBA loans, you need to
have a good credit score and cash flow. The loan
process is also longer and usually takes up to
four weeks.
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Alternative Lending
Besides traditional funding and SBA loans, there
are online lending options available for small
businesses including online business loans,
Crowdfunding, merchant cash advances, and
peer-to-peer lending options. Crowdfunding is
among the popular funding option for startups.
Popular crowdfunding sites like Kickstarter,
Indiegogo, and Causes allow people to invest
their money to get your business up and running
in exchange for your products or service. A
merchant cash advance (MCA) is another funding
option where you get cash upfront in exchange for
a percentage of your future credit card sales.
Merchant cash advances are best suited for
restaurants and retailers. Peer-to-peer lending
or P2P Lending is another funding option where
small businesses secure capital via a third-party
lender that matches borrowers with investors. The
application process for P2P lending is simple
with quick funding but at high-interest rates.
Merchant Advisors provides small business funding
with a simple application process, little
documentation, loan amounts from 5,000 to
500,000 with approvals in 24 hours and funding
in as quickly as 3-5 business days.
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What Are Small Business Grants?
Small business grants are money offered to small
business owners to help them realize their
business goals. You can get business grants from
the federal government, regional governments, and
several non-profit organizations. Small business
grants dont need to be paid back and in order to
secure a grant, youll need to demonstrate that
you will put the money to good use. To secure a
grant, you need to have a solid business plan,
show progress and how youll use the money. The
grant application process can involve meeting
with grant providers and providing financial
statements and projections.
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• Time in Business
• Business Monthly Revenue
• Number of Employees
• Monthly Revenue
• How you will use the funds
• Business Elevator Pitch
• Employer Identification Number (EIN)
• The imagery of you or your partners or offices
• A viable business plan

How to Apply for a Small Business Grant
Here are a few common things you need to provide
when applying for a small business grant
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Types of Small Business Grants Available
Federal Government Grants
State and Regional Agencies
You can get small business grants from various
federal agencies, non-profit organizations, and
corporations. Here are some of the most common
types of business grants available for you.
For Women-owned Businesses
For Veteran-owned Businesses
For Minorities
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Federal Government Grants
The federal government grants are economic aid
typically offered to non-profit, educational, and
scientific research institutions. You will find a
variety of online resources to help you find
federal grants. The main official source of such
grants is Grants.gov that is a detailed database
of federal funding opportunities from state
government and federal agencies. The Small
Business Administration (SBA) is another most
popular source of small business grants that work
with different organizations to provide grants
for small businesses. If youre engaged in
scientific research and development, you can
obtain federal grants via the Small Business
Innovation Research (SBIR) and the Small Business
Technology Transfer (STTR) programs. There are
also financial awards available for businesses
with export development.
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State and Regional Agencies

• There are state and regional government agencies
  that provide small business grants. The Economic
  Development Administration (EDA) offices under
  different regions provide grants to small
  businesses in their respective regions. There are
  also State-based grants particularly for
  businesses that directly benefit the states
  residents such as educational institutions,
  healthcare, and the arts.
• The best approach to look for State and Regional
  Agencies in your area, visit your states
  government website or on the Grants.gov. The most
  common state-based or agencies for grants are
• Appalachian Regional Commission (ARC)
• Delta Regional Authority (DRA)
• United States-México Border Health Commission
• Western Governors Association (WGA)

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For Women-owned Businesses

• There are particular grants available for
  women-owned businesses. Women in the U.S. own
  approximately 40 of small businesses. Besides
  this huge number of businesses, theyre less
  likely to receive business funding approved for a
  small business loan. To help women business
  owners grow and succeed, some government
  agencies, nonprofits, and private companies
  provide small business grants to women-owned
  businesses. The best small business grants for
  women-owned businesses include
• Grants.gov
• National Association for the Self-Employed Growth
  Grants
• Eileen Fisher Women-Owned Business Grant Program
• Amber Grant
• IdeaCafe Grant
• GIRLBOSS Foundation Grant
• Cartier Womens Initiative Award
• FedEx Small Business Grant
• The Halstead Grant
• Open Meadows Foundation

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For Veteran-owned Businesses

• Veterans owned almost 10 of the small businesses
  in the U.S. However, starting a business is
  challenging for veterans who are experiencing the
  military transition to civilian life. There are
  grants, financial education, and other services
  available to help veterans with their businesses.
  You can also use the SBAs search feature to find
  your local center for grants. The best grants
  sources for veteran-owned businesses include
• Veterans Business Outreach Center
• Office of Small and Disadvantaged Business
  Utilization
• The Boots to Business program
• Small Business Innovation Research Grant
• Small Business Technology Transfer Program
• The National Association for the Self-Employed
  Growth Grants
• Idea Café Grants
• Self-Employment Grants for Service-Disabled
  Veterans
• Veterans Business Fund
• Vocational Rehabilitation and Employment Program
  for Disabled Vets
• The StreetShares Foundation
• Veteran Entrepreneur Portal
• Womens Veteran Entrepreneurship Training Program
  
• Grants.gov

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For Minorities

• The minority-owned businesses also have to face
  challenges in finding financial assistance to
  start and grow their businesses. To help them
  succeed, there are many small business grants
  available to help overcome the challenges. The
  best grants sources for veteran-owned businesses
  include
• Minority Business Development Agency (MBDA)
• Office of Minority Health (OMH)
• Native American Business Development Institute
  (NABDI) Grant
• Community Programs to Improve Minority Health
  Grant Program
• McInerny Foundation
• FedEx Small Business Grant Contest
• Asian Women Giving Circle
• National Association for the Self-Employed (NASE)
  Growth Grants
• Native Language Immersion Initiative
• LendingTree Guide Small Business Grant

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The Key Differences Small Business Grants vs.
Small Business Funding
You pay interest on business loans
Grants are taxable income
Grants wont help you build business credit
Grants are direct competition, and loans arent
Loans carry significant penalties
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Which Is Better
Small Business Grants vs. Small Business Funding
While pursuing these financing options, there are
a few things you should consider. When time is of
essence or your business doesnt qualify for
grants, business funding could be a better
option. When youre just starting with low
credit score and annual revenue, qualifying for
business funding could be difficult. A small
business grant is the most appropriate option for
startups. However, you can also search for
alternative lenders that provide startup business
loans. You can also benefit from using both
these options. Some businesses use business
funding to supplement a grant. Having an adequate
amount of capital is essential for your business
to stay competitive and thrive. Therefore, having
quick access to a grant or business founding
could be the difference between failure and
success.
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