When financially planning for business success, it's important to understand your options. Maybe you're a local non-profit helping women and a grant might be a good fit or you're a a construction company seeking new equipment and then equipment financing might be your best option. No matter what type of business you run, knowing what's out there is key.
Business Loan
What It Is: A business loan is a sum of money that a financing institution, like a bank or credit union, temporarily gives to a small business, with the expectation that it will be paid back over time, plus interest.
Repayment Terms: Loan repayment typically ranges between five and 10 years.
What It Can Be Used For: A business loan can be used for expenditures like starting or expanding a company, paying employee wages, funding marketing efforts, purchasing new equipment or vehicles, or paying for office space.
Business Grant
What It Is: A business grant is a sum of money that a private organization or a federal, state, or local government gives to a small business to use toward very specific business functions.
Repayment Terms: Unlike loans, grants do not have to be repaid.
What It Can Be Used For: Small businesses must meet very specific criteria to receive a grant and they must use the money for reasons specified by the granter.
Government grants for small businesses come in three forms: federal, state, and local. While federal grants usually offer the most money, they have the most competition and they’re also pretty specific and usually tied to a government agency that has clear requirements for qualifying for the money and what they expect you to do with it. State grants are usually less money than federal grants but also less competitive. State governments may work with the federal government to administer money that’s been set aside specifically for small business grants. On the local level, grants tend to be even smaller and are about improving your local community.
Now What?
To determine whether grants or loans are what your business needs, you’ll need to consider several factors.
What type of business do you run?
What's you objective?
What's your timeline?
How quickly can you pay it back (if required)?