A Small Business Owner’s Guide to Loans and Grants


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Finally, the restaurant of your dreams is taking shape. You have it all on paper; you know where you’re going to set up, how you’re going to create the right ambiance, what you’re going to serve your patrons. Just one little ingredient is missing from your recipe for success: the capital to turn your dream into a reality. If you don’t have a golden egg somewhere or investors with deep pockets to fund your project, you’ll have to be resourceful to find the money to launch a small business. It’s time to start researching and applying for small business grants or loans.

Financial Planning

It would be hard for anyone to invest your business without seeing something concrete on paper, especially if the sum you have in mind for your capital runs into the tens of thousands of dollars. But with a detailed business plan, you will be able to show potential financiers how your enterprise will start, run, and grow. More importantly, they will be able to see how you will generate enough revenue to repay their investment.

Not sure what to include in your business plan? The U.S. Small Business Administration (SBA) provides resources for developing a traditional business plan or lean startup plan, which you can find here.

Loans

There are several kinds of loans available to small business owners, each with unique terms and conditions. Lenders tailor these loans to meet different needs, so it’s wise for you to have a clear purpose for the funds before you apply. 

  • Personal Loans– Many small businesses start with a single entrepreneur who takes out personal loans. Eligibility for such loans usually will depend on your personal credit history and the activity of your account. 
  • Merchant Cash Advances– If your business is already up and running, you could ask a lender to advance you some funds in return for a percentage of your daily sales.  
  • Microloans– This type of loan is ideal if you require $50,000 or less. It can help you offset some startup costs, obtain assets, or purchase more stock during your peak season. 
  • Business Line of Credit– You can establish a line of credit with a bank or any other lender to cater to your business’s operational expenses. This option is especially useful when you don’t have an assured stream of revenue. The lender will give you a set limit up to which you can borrow whenever the need arises. 

Grants

If your small business is a non-profit or educational institution, you can consider applying for a federal grant through the SBA. The SBA has several funding programs, including the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program. Also, the federal government sometimes gives state and local governments funding to assist small businesses through the State Trade Expansion Program (STEP). 

Outside the industries of nonprofits and education, businesses can find and apply for federal grants through Grants.gov. You can also find federal or states grants through the government departments most relevant to your business. For example, the Environmental Protection Agency, Department of Transportation, and Department of Agriculture all have grant programs. 

Private Grants

There are many grants available to small businesses that are not state-funded. Many charitable foundations and large corporations sponsor private grants as part of their corporate social responsibility activities. For example, Facebook, Amazon, and FedEx run competitive grant programs. 

While some grants are open to small businesses of any kind, sometimes the benefactors target a specific demographic. For example, there are grants available only to women-owned enterprises or businesses owned by immigrants. There are also those available only to military veterans. You may also have to be in a specific line of business to access some grants. The James Beard Foundation Relief Fund, for instance, issues micro-grants only to companies in the food and beverage industry. 

Do Your Homework

As an aspiring business owner, there are many options available to fund your dream. If you do your research well, you can find access to cheap credit without sacrificing a percentage of your business or surrendering your assets as security. There’s funding out there—you just have to find it.