Beginning Guide for eCommerce Business Grants and loans
Beginning a new business can be the most exciting time in your the course of. Growing a business can be exciting too, because it means the initial plan will pay dividends. However, one of the main hurdles to both is money and having enough capital to launch or expand. The good news is, by doing a bit of research it is possible to find small business grants and loan opportunities.
Just need some help knowing where to look. For that, you've found the perfect place.
What is the difference between small-business grants and loans?
Small business grants are essentially unpaid money. You don't need to repay it, at all. The majority of grants come with stipulations as well as restrictions on who will win the grant, and what the grant will be used. Also, most grants have an arduous application procedure, and the IRS generally considers a grant to be business income, meaning that it is tax-deductible.
A small-business loan, also known as financing a loan granted to you, which you will have to repay as you would a home or car loan. Certain small business loans cost an interest rate, while other loans charge a flat fee.
Types of small business loans
In essence, there are three kinds of small-business funding:
- A debt financing refers to the fact that an institution offers you money and you have to repay it generally with interest and on a set schedule. In some cases, they may also require a form of collateral so if you default on this loan, the lender can can seize the property you entrusted to it.
- Equity funding is the process whereby a company or partner offers you a loan in exchange for partial ownership of the company. Usually you'll pay an amount of earnings going forward. Also, you lose some autonomy because you now have an business partner. The loan will typically be free of interest.
- revenue-based finance is where you receive the loan but pay it back as an amount of revenue and not as a monthly fixed installment. This will be discussed more in the future when we discuss Payments plus Stripe Capital and Wayflyer.
However, within these categories, you can find certain variants. Most loans come from banks. Some are offered by the government. Others come are provided by private companies that specialize in the field.
Fundera is an excellent source to learn more about financing small-scale businesses. It also lists particular banks as well as the scores of credit they require. Some banks and lenders offer specific loans they may find relevant for you. Learn more about each of the financing options available at Fundera:
- Equipment financing: a loan to finance the purchase of equipment
- A short-term business loan is the perfect solution for fast turnarounds and immediate needs
- Merchant cash advance: a alternative to the revenue-based finance
- Loans for startups: Financing made specifically to new companies
- Credit line for business: a flexible loan which allows money to be accessed when you need it
- SBA loans: loans through the Small Business Administration, including microloans
Factors to consider when pursuing small-business financing
The three main factors that you should consider before applying or accepting an offer for a small company loan are ownership control, and risk.
With equity-based loans, for example, you're able to give up an amount of ownership of your business, and you have less control over decision-making. But, these loans usually don't have any interest and they're not risky.
A loan to existing small firms: introduction + Stripe Capital
Finance can help strengthen your business's growth which allows you to grow and grow faster. Fast, flexible finance, Stripe Capital enables U.S.-based companies to finance growth and stabilize the flow of cash.
With and Stripe loans, you can get offered by Stripe's bank partner, Celtic Bank, based on factors such as the sales of your business and its history in payments. There's no lengthy application process and there's no credit test for consumers.
When you've received an offer by email or through your dashboard messages, you can choose the right size for you and apply in just a few minutes. In the case of approved businesses, money usually arrive in as short as one working day.
Contrary to many loans provided by the traditional banking institutions, + Stripe Capital charges an unchanging fee which is not subject to changes. This means that there aren't penalties for late payments or interest charges for you to worry about. Also, repayment is made automatically with a predetermined proportion of your transactions and is dependent on your revenue. A set percentage of your sales will continue to be taken out until the entire amount due is paid.
For example, suppose you obtain a $20,000 loan through Stripe Capital, and they give you a 10% fee. That means your total loan amount is $22,000, which is a loan amount of $20,000 with a loan fee of $2,000.
In our example, Stripe Capital has established an interest rate for payback of 12%. That means every morning, Stripe Capital is able to automatically deduct 12% of revenue from your account for that month until the loan has been paid off. This can be beneficial to you because it means your payments will increase and fall based on the amount of revenue you earn, meaning your monthly payments won't exceed your income. If you don't earn any revenue during a particular month, then there isn't a single payment.
Suppose one day you make the sum of $900 and the next day you're making $1,300. The first day (assuming a 12% payment) will be $108 and on the second day, it's $156.
A different low-risk business financing alternative: Wayflyer
In lieu of interest, Wayflyer has a fixed cost. And because it's a revenue-based loan, you're not at a risk of going into default, because revenue-based loans make the payments every month, based on how much revenue your company generates.
The types of small business grants available
Unlike loans, which are relatively easy to comprehend but grants can be difficult to locate and understand all requirements and restrictions.
In general, there are two kinds of grants: government grants and private grants. Private grants typically come from foundations or businesses.
There are grants for any of the many very particular situations and types of businesses, including:
- Awards for contest winners
- Research and development companies for scientific research
- Companies owned by women, minorities, or veterans
- Rural and agricultural businesses
- Beauty and health businesses
- And numerous others...
If you visit websites like Grantwatch, which requires a cost for all details of a grant, you'll find a myriad of possibilities which are regularly updated. But before your mouth starts flowing, keep in mind that you're unlikely to be eligible to receive many of the grant opportunities, as they may be used for specific circumstances similar to those described below.
Here are some sources to get more grants in a bit.
Small business grants for applicants
When you are applying for a small business grant, the first task is to narrow down the grants your company is actually eligible for. There's no use filling with a lengthy application for a small-business grant if that you aren't likely to getting because you're not meeting the requirements.
For example, if you're part of minorities and you're a minority, you can make an application for several small-business grants for minority businesses. You'll have a better shot at those than the general grantsbecause there'll be less competition because those grants were created specifically for companies like yours.
For existing companies, you'll require a thorough business plan since most grant applications ask very specific inquiries.
The applicants want to know why you need this grant.
They'd like to ensure that their money is funding an investment in a profitable business or expansion with a high-potential and is in line with their motives to grant the money. If you haven't revised your business plan for an extended period of time, you may want to get it done first.
If you have an existing firm, you'll want up-to date information regarding the annual income, numbers of employees and your Employer Identification Number (EIN), as well as other essential information.
Next, you must write down your pitch and then set aside time to answer all the specific questions on every grant application.
Small business loan applications
The application process to apply for a business loan depends extensively on the kind of loan you're looking for.
If you're going for a federal small business loan such as a 7a loans it will require a very different process as compared to a bank. There are usually additional hurdles to cross in order to obtain government-backed financing. getting through the maze of online applications isn't easy. But, federal loans can be easier to get which is why they could provide a better alternative to a bank loan.
Like you have seen earlier, there are a variety of types of small-business loans. The Fundera website lists the specific institutions and banks that offer each type.
When you are applying for small-business loan, it is important to be aware of:
- Your credit score
- What are the reasons you'll need this loan?
- Your average monthly revenue
- The amount you're seeking
- How do you pay the loan back
Places to find small business grants and loans
Prepare yourself, for there's a deluge of resources in this regard. They vary in ease of use and navigation.
- Small business grants from Nav contest. It awards a $30,000 grant for small companies every quarter, plus a runner-up grant prize, to any businesses that submit an application and get their prize. This grant comes with almost no restrictions.
- FedEx grant contest. FedEx has their grant contest running multiple times a year. the winners also receive an account for printing services and a web site audit as well as other benefits. The highest prize is $50,000.
- Visa Global Innovation Grant. Visa's grant program has a few more stipulations that the previous two contests and they pick the winners each year.
- Grantwatch as well as Opengrants. The services are fee-based and grant-finding which are excellent places to find smallergrants, which are based on niches which would otherwise be difficult to locate. It is possible to search for grants by location, type of grant, business nature, as well as other factors.
- US Chamber of Commerce grants. Another great resource for grants of all kinds. And it includes a nice listing of small-scale general business grants which are open for all types of firms as well as those that have a more limited scope.
- self-employed grants for business. If you're self-employed , and an NASE member NASE and are eligible, you could be able to apply for a grant to small businesses each month for up to $4000.
And there are other lists of grants provided by the Nav, Bench and even government agencies like the the federal government. The grants of the government are less likely to be eligible. probability of qualification, because they tend to fund only certain types of companies.
What's the deal with the Small Business Association?
The SBA is a federal agency, and with such a title one would assume they would offer grant money for... small companies. But most of their money is used to fund local and state initiatives for small and medium-sized enterprises.
If you're looking for grants from the government for grants, you might get better results by using the state and local levels. This Economic Development Directory website won't connect you with grants directly, but it will provide a searchable and clickable map for each state. It will connect you with many local sources.
Small-sized business loans
The Federal S mall's business loans program offers a variety of options that aren't suitable for all companies. However, the 7a plan is the most common oneand should be considered in case you are looking for small-scale company funding.
Go get 'em!
If you're looking for ways to boost your new or existing business a financial boost, hopefully you're feeling more motivated, inspired and educated.
Here's what you can do:
- Make sure you update your business plan.
- Look through the options that may seem appropriate for your company and situation.
- Look for smaller business grants and finance alternatives that give you a chance at winning.
- Speak to your trusted advisors and mentors if you are fortunate enough to have them.
Be aware that, with + Stripe Capital, all loans are made by Celtic Bank, a Utah-Chartered Industrial Bank, a Member of FDIC. All loans subject to credit approval.