Whether you are a business needs funding to expand your operations or an individual in need of a personal loan, it’s necessary to know what financing options are available to you. Small business loans and grants are the two most common funding options you can choose from.
Although the two accomplish somehow the same end results yet both are fundamentally different. It is advisable, before you submit an application, get to know the difference between them.
Difference Between Small Business Loans and Grants
The major difference between loan and grant is repayment. A loan needs you to repay the capital (along with interest) you borrow while the grant is usually a gift. A grant may be endowed by trusts, corporates and government departments to an individual, educational institutions, businesses or nonprofits. On the contrary, loans are generally given by financial institutions to businesses and individuals.
Advantages of a Loan
In comparison to grants, loans provide more opportunities, you can get loans from banks, private lenders or individuals. Moreover, with grants, you can expect a limited amount of financing. Usually, they are supported by government departments and only a limited amount of funds are available each year. On the other hand, the loan gives you funds according to your credit score and ability to repay.
Advantages of a Grant
Grants are non-repayable, therefore you need not to worry about monthly payments. There is no risk involved in grants. If the loan is not repaid, you may put your credit rating in danger.
Small Business Loans or Grants For Minorities
Over the years, minority-owned businesses have expanded their reach across the country. Their contribution to the economy is beneficial, still, it is difficult for them to access sufficient capital.
Let’s get to know whether loan or grant can help them manage their finances.
Small Business Loans
It can be difficult for minority-owned business getting a small business loan from a traditional bank, especially if they are just starting out. Some banks may request collateral that can be claimed if a loan is not repaid.
Fortunately, there are a variety of commercial funding sources available such as online lenders and financial service providers providing products like unsecured lines of credit, invoice factoring, equipment lease, etc.
Although you don’t need to pay back your grants, they are much more restrictive than other funding options available for minorities. Grants come with strict guidelines related to who qualifies for funds and what those funds can be used for.
There are some government-backed grants available, but they might be industry or geographic-specific grants. You will need to check whether or not you qualify for them.
Small Business Loans or Grants For Veterans
For veterans, who are entrepreneurs, a small business loan can be helpful for a variety of purposes like hiring new employees, purchasing equipment and funding marketing expenses. Some of the popular business loans veterans can apply for includes Military economic injury loans, veterans business fund, SBA loans, etc.
Speaking of grants for veterans, they always come with strict guidelines limitation. In most cases, it almost impossible to qualify for these funds. So, before you make a decision, seek the assistance of a reputable financing firm that can better guide you on which option you should go with.