There are several reasons why a small business owner would pursue loans and grants, like the need to consolidate debts, save their business, or take their small business to the next level (i.e., expansion, new opportunity, etc.). In fact, Fundera reports that as many as 70% of small businesses have outstanding debt and more than 56% of small businesses apply for funding to expand their business, pursue a new opportunity, or acquire business assets.
Whatever the reason you need business funding, knowing your small business loan and grant options is the most important step moving forward. After all, your business is your most valuable asset and should be taken care of as such.
Types of Small Business Grants
Grants are a fantastic way to go if your small business qualifies for one. You can acquire them from the federal, state, county, and local governments or some private organizations and businesses. Aimed to achieve a specified purpose, grants are typically available to small business owners during their initial startup, expansion, or research and development.
Essentially, you get the money you need (or at least a portion of it) without the hassle of paying it back. It sounds unbelievable, but they do exist, and they can come in one of the following.
Coronavirus Small Business Grants
With more than 9 million U.S. small businesses fearing they won’t survive the aftermath of the pandemic, the coronavirus small-business grants were provided as relief to owners who needed it.
To name a few of many, the following are coronavirus relief grants for small business:
- Shuttered Venue Operators Grants — SVOG grants award eligible owners with emergency assistance, prioritizing entities who’ve suffered the most. The grant amount is equal to either 45% of your 2019 gross earned revenue (capped at $10 million) or the average monthly gross earned revenue for each entire month in operation (also capped at $10 million).
- LISC’s Small Business Relief Grant — LISC prides itself on helping the underserved by creating more economic opportunities in the areas that need them most. Amounts range from $5,000 to $20,000 and can only be used for rent utilities, meeting payroll, paying outstanding vendor debts, and other operational costs.
- Federal SBA Grants — While the Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) are technically considered loans, eligible small business owners can benefit from as much as $10,000 in loan forgiveness (grant money). In these cases, PPP requires owners to use most of the funds towards payroll, and EIDL requires you to be in a low-income neighborhood, have more than 30% economic loss, and have fewer than 300 employees.
- Paycheck Protection Program — the PPP was put in place by the government to help businesses keep their workforce employed during the COVID-19 crisis. While it is technically a loan relief program, PPP loan forgiveness is available to eligible recipients.
- The Barstool Fund — The Barstool Fund has raised as much as $39,292,608 (still growing by the day) and has supported 342 businesses so far. The grant amount depends on the needs of the small business and the amount of money available for funding.
Federal Small Business Grants
When small businesses participate in federal research and development, they become eligible to receive government grants for small business loans to help with their finances. The place to start your business loan grants research is at grants.gov since it is constantly changing and combining new opportunities.
Federal grants can include:
- Small Business Innovation Research Program (SBIR)
- Small Business Technology Transfer Program (STTR)
- USDA Rural Business Enterprise Grant Program
- U.S. Department of Commerce Minority Business Development Agency (MBDA)
- U.S. Small Business Administration State Trade Expansion Program (STEP)
- U.S. Economic Development Administration (EDA)
State and Regional Small Business Grants
Likewise, state and regional small business grants can come in handy when you need the most money. In these cases, you can find some of the following as an option:
- Federal and State Technology (FAST) Partnership Program
- State Trade Expansion Program (STEP)
- SBDC Northeast California/SBDC Pennsylvania
- Portable Assistance Program
- Economic Development Administration
- Small Business Development Centers
Corporate Small Business Grants
Generally aimed at a specific purpose important to the corporation, nonprofit, or foundation supplying, corporate small-business grants are very competitive and challenging to get. However, if you meet their specific industry needs/requirements, you could be awarded a significant amount of free money.
Some great examples of this are:
- FedEx Small Business Grant Contest ($25,000)
- IdeaCafe Small Business Grant ($1,000)
- LendingTree Small Business Grant Contest ($50,000)
- Eileen Fisher Women-Owned Business Grant Program ($12,000-$120,000)
- Coca-Cola Foundation (no set amount)
Specialty Small Business Grants
No small business owner is the same, and specialty small-business grants are around to cater to those differences. Consider checking out the only ones that apply to you, as there can be many of them.
To help give you an idea, the following options are available:
- Veteran Federal Procurement Entrepreneur Training Program (VFPETP)
- Women Veteran Entrepreneurship Training Program (WVETP)
- Service-Disabled Veteran Entrepreneurship Training Program (SDVETP)
- Veterans Business Outreach Centers
- Black Founder Startup Grant
- SBA Restaurant Revitalization Fund
Types of Small Business Loans
Grants are always easily accessed, so it can also be imperative for you to consider your small business loan options. While they aren’t “free money” like grants, the right ones can help you get your business to where you want it to be without the capital limitations some owners struggle with.
Some of the most popular small business loan types include the following.
Business Line of Credit
A business line of credit is perfect for the small business owners forced to adapt to sudden changes and in need of flexible terms for repaying borrowed funds. Unlike most loans that serve a specific purpose, a business line of credit is available when you need a little extra assistance with cash flow.
More like a credit card, this loan option isn’t just one lump sum transferred upon agreement (or scheduled overtime), but rather a certain amount available for access at any time (upon annual renewal). Essentially, you pull out what you need, when you need it, and start paying it back monthly. The amount you have available in the future depends solely on what you’ve paid back.
How much you receive from an equipment financing loan option depends on the value of the equipment you plan to purchase. The good and bad thing about this loan is the equipment is your collateral — so you either pay the debt off or lose your equipment. On a positive note, interest rates with this loan type are generally lower than other options.
You also own the equipment completely once your debt is paid off and can even enjoy a depreciation tax benefit when tax time rolls around. On the other hand, if the equipment is susceptible to losing value and becoming outdated, you may not get back what you put in to purchase it.
Merchant Cash Advances
A merchant cash advance allows you to borrow from your future earnings to get the financing you need right now. After you agree with your lender, you’ll agree on a set percentage of your funds to be withheld for the lender until your entire debt is paid off, and you can see the money in your account as quickly as a day.
Due to its convenient nature, rates usually balance around 18%+ and range in loan amounts between $10,000 and $200,000+. As long as your credit history is in good standing and you have half the year’s bank statements, you shouldn’t have any issues.
Small Business Administration (SBA) Loans
While the SBA is a government agency specific to the growth and success of small businesses, they are not the ones who would issue this option to owners — instead, they are typically issued by micro-lenders, community development organizations, partner lenders, etc. However, the SBA guarantees the loan by reducing lender risk, given you follow the specified guidelines to repay it.
This option can be great because small business owners get access to rates and fees comparable to non-guaranteed loans, regular support and help running your business (counseling, education, etc.), and great benefits like lower down payments, no collateral (in some cases), and more.
Startup Business Loans
Arguably some of the most important small business loans available, startup business loans are essential to bringing your most creative and successful ideas to life. After all, you may have the best idea on the market, but it doesn’t matter if you don’t have the funds to pursue it.
That being said, startup loans are also some of the most difficult to obtain. This is because your startup doesn’t have the track history and credit boost most other established businesses already have on hand — you are new, have poor or no credit, and can’t report any significant cash flow as proof of your ability to maintain loan payments.
You may use your personal credit in these cases, but you should be vigilant enough not to borrow more than you need or can afford.