Small business loans and grants are the backbone of many small businesses, unless the owner simply happens to be independently wealthy and doesn’t need financial help to get started. Starting a new business and applying for small business loans and grants can seem like a daunting task, particularly for someone who has never been through the process.
Small business loans are not as confusing as grants can be as these are simply loans from local financial institutions that can be used to start up a small business. They are not typically as difficult to get as grants can be and don’t have as many stipulations as grants do. The following information concerning grants should help get the potential business owner started on their way to having a new business up and running.
Grants differ from loans in many ways such as the factors that determine eligibility and approval. Grants are dependent on how much money is available to given out as well as the business or project that the money is going to be used for and how that business will help society as a whole.
The majority of government grants for small business are awarded to businesses that fall under artistic development, scientific type work, research, educational work and businesses that support or are owned by minorities.
Unlike loans, grants are totally free and do not have to be paid by back; on the other hand, grants are much harder to apply for and have a lot of stipulations that must be followed in order to get approval.
Steps to Applying for a Grant
The process for applying for a grant is one that must be adhered to explicitly. The entire process is much more elaborate than simply filling out some loan applications and presenting a business plan.
The first step is to find out which grants are available for the type of business that is being considered. The Internet is an excellent source of information on where to apply for grants. Once the right grant has been found, it is time to start applying for the grant.
Every grant will have a set of exact instructions that must be followed completely. All grants require that a complete proposal be submitted that includes what the goals are that the business will accomplish and explains what the money is going to be used for in detail. This part of the application process is very important as it can make or break the grant approval. Many prospective business owners hire someone to write their proposal to ensure that it is polished and complete in every aspect. Some of the most important parts of the proposal to include are:
- The main goal of the business, what it offers the community;
- How the business will compete with other like businesses;
- Advertising strategies;
- How many employees will be hired;
- How they business will keep the government of grantor updated on the progress;
- Any research or background information that the applicant has about the demography of the area where the business will be located;
- Current financial status of the applicant.
This may sound like a lot of information to include in a grant proposal; however, grants are free money and the government of grantor wants to ensure that they are putting their money into a business that will not only succeed but will also bring something to either the community where it is located or to society in general.
There is typically a time frame that must be adhered to when applying for grants. The importance of this should be noted during the research for available grants. Grants typically have a deadline for applying and once that deadline has passed, the grant is no longer open for proposals. The deadline and other important timeline information is included with all of the information that is released in the Federal Register. This is the place announcements are made about grants and is available every day except weekends. The time frame is one of the most important aspects to consider when looking for a grant, choosing one that has a very short time left in which to apply is a recipe for disaster. Rushing the proposal is not a good idea and can result in less than the ideal application.
Small business loans are not as complicated to apply for and typically can be done in the local branch of any financial institution. The typical small business loan requires a business plan to be submitted that will show the bank that the business has a solid plan that has excellent chances of success.
Loans and grants are both great ways to pursue starting a small business. Loans are usually easier to obtain than grants; however, grants do not have to be repaid and so are worth the extra effort required to obtain approval.