Starting Guide for eCommerce Business Grants & Loans
Beginning a new business can be one of the best experiences in your the course of. Growing a business can be exciting too since it signifies that the idea you had initially thought of is paying off. But one of the biggest hurdles to both is money in the form of money to begin or expand. There's good news, by doing a bit of research, you can find small-scale business grants as well as loan opportunities.
You just need a little guidance on where to look. And for that, you've found the perfect place.
What is the difference between small-business grants and loans?
A small business grant is basically cash for free. This means that you do not have to return it at all. But, the majority of grants have conditions and restrictions regarding who can win the grant, and what the grant can be utilized. They also usually have extensive application procedures as well as the IRS generally considers a grant as a business expense, therefore, it's tax-deductible.
A small business loan which is sometimes referred to as financing, money granted to you, which you must eventually pay back, just like a house or car loan. Some small business loans charge the interest while some have a fixed fee.
The types of small-business loans
There are basically three types of small business financing:
- Debt financing refers to the fact that an institution offers you money and you have to pay it back typically with interest, on a set schedule. Sometimes they also want an alternative form of collateral, so that in the event of default on this loan, the lender can can seize the collateral you have assigned to them.
- Equity financing is when another partner or business entity gives you a loan as a trade for partial ownership of the business. In most cases, you pay an amount of revenue going forward, and you lose some autonomy because you now have an business partner. But the loan is typically not a cost of borrowing.
- The term "revenue-based" financing is where you receive an advance, however you pay it back as a share of your revenue instead of a set monthly installment. More details will be provided as we get into Payments plus Stripe Capital and Wayflyer.
Within those categories, you can find certain variations. A majority of loans originate from banks, but some may be made available through the government and some from specialized private businesses.
Fundera offers an terrific tool for learning all about financing small-scale businesses. The site also provides a list of specific banks and the credit scores they require. A few lenders and banks provide specific loans which may apply for you. You can find out more about each of these options of financing on Fundera:
- Equipment financing is a type of loan that pays for a piece of equipment
- Business loans for short-term duration: an option for quick turnarounds and immediate needs
- Merchant cash advance: variant of revenue-based financing
- Startup loans: financing given especially for businesses that are just starting out.
- Credit line for business: a flexible loan that makes money available as you need it
- SBA loans: financing via the Small Business Administration, including microloans
Considerations to make when looking for small-scale business finance
The three most important factors you need to consider prior to accepting or requesting an offer for a small business loan include ownership, control and the risk.
With equity-based loans, for example, you give up an amount of ownership of the business you run, and lose control of taking of the decisions. These loans typically do not have interest rates, which means they're not risky.
A loan for existing small businesses: introducing + Stripe Capital
Access to financing can fortify and boost your expanding business by allowing you to expand and expand faster. Through flexible, fast finance, Stripe Capital enables U.S.-based companies to fund growth as well as 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 with Payments. It's not a lengthy process to apply or consumer credit checks.
If you've been offered a deal through email or notifications on your dashboard, you'll be able to choose the right size for you, and then apply within minutes. If approved, the funds typically arrive in as little as one working day.
Unlike many loans offered through conventional banks + Stripe Capital charges an unchanging fee and that fee never changes. This means that there aren't interest charges or late fees to be concerned about. The repayment process is also automated, with a predetermined percentage of your transactions, and adjusts to your daily sales. The fixed percentage continues to be deducted until the entire amount due is paid.
For example, suppose you obtain a $20,000 loan from Stripe Capital, and they provide you with a 10% fee. The total amount is $22,000, which amounts to a loan of $20,000 and a loan cost of $2,000.
For our instance, Stripe Capital has established a payback rate of 12%. That means every the day Stripe Capital is able to automatically deduct 12% of income from your account each month until the loan has been paid to. This is beneficial for you as it implies that your payments will increase and fall based on the income you earn. Therefore, the amount you pay will not surpass your earnings. If you do not earn any income in a given month, there's no amount to pay.
Imagine that one day you earn an income of $900, then the following day, you're making $1,300. Your payment on the first day (assuming that the payment is 12%) is $108, while on the following day, the amount would be $156.
A second low-risk eCommerce business finance alternative: Wayflyer
Instead of interest, Wayflyer has a fixed cost. Because it's a income-based loan, there is no possibility of falling into the position of default because these loans adjust the payment each month based on how much income your business generates.
Types of small business grants
In contrast to loans, which are relatively easy to comprehend however, grants are difficult to identify and understand all requirements and restrictions.
There are generally two types of grants: grants from government agencies and private ones. Private grants are usually provided by foundations, businesses, or companies.
Grants are available for all kinds of very special situations and kinds of business which include:
- Awards for contest winners
- Companies that conduct scientific research
- Businesses owned by women, minorities or veterans
- Rural and agricultural businesses
- Businesses in the fields of beauty and health
- There are many more...
So when you go to websites like Grantwatch, which has a charge if you want all the details of a grant, there are thousands of grants available, updated frequently. However, before your mouth begins getting watery, be aware that you won't qualify for a lot of these grant opportunities, as they may be used for specific circumstances similar to those described below.
We'll show you some resources for more grants in the next few moments.
Small business grants for applicants
When you are applying for a small-business grant, your first step is to narrow down the grants you actually qualify for. It's not worth filling out a long application for a small-business grant if you have no chance of being awarded because you do not meet the prerequisites.
In the case of, say, being part of a minority group and you're a minority, you can submit a variety of small-business grants for minority businesses. You'll have a better shot in securing them than other grants, because there will be less competition, and because these grants were made specifically for companies like ones like yours.
In addition, for established companies, you'll need a professionally written business plan because the majority of grant applications ask very specific questions.
They would like to know why you need this grant.
They'd like to ensure that the money they give is going to an investment in a profitable business or an expansion that has a lot of potential as well as a reason in granting the grant. If you've not updated your business plan in some duration, you might want to start by updating your plan.
If you already have a firm, you'll want updated information on the amount of revenue you earn each year, your number of employees, your Employer Identification Number (EIN), along with other fundamental information.
Then, nail down your pitch and then set aside time to answer each of the questions specific to every grant application.
The process of applying for small-business loans
The process for applying for a business loan is contingent extensively on the kind of loan you're looking for.
If you're going for the federal Small Business Loan similar to a 7a loan is a very different process as compared to a bank. Usually, there are many more hurdles to go through to get government funding, and getting through the maze of online applications can be frustrating. But, federal loans can be more accessible to those who qualify, so it may be a good alternative to bank loans.
As you saw earlier, there are a variety of variations of small business loan types, and the Fundera site lists specific banks and entities offering each kind of.
When you are applying for small-business loans, know:
- Your credit score
- The reason you require the loan
- Your average monthly revenue
- The quantity you're after
- The plan you have for paying the loan back
Small business-friendly places to look for grants and loans
Get ready, because you'll find a wealth of information to help you with this. They differ in their ease of use and navigation.
- The Nav Small Business Grant contest. Nav awards a $10,000 grant to small-sized businesses each quarter, plus a runner-up award to all companies that participate and are successful in winning their contest. This grant comes with almost no restrictions.
- FedEx grant contest. FedEx offers their contest several times throughout the year. the winners also receive a print services credit and a web site audit along with other perks. The highest prize is $50,000.
- Visa global innovation grant. The grant competition offered by Visa has a few more stipulations than the first two, but they choose four winners annually.
- Grantwatch as well as Opengrants. They are grant-finding companies that charge a fee that are great places to find smaller, niche-based grants which would otherwise be hard to find. It is possible to search for grants for grants by location, type of grant, company kind, or other criteria.
- 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 that are available to all kinds of businesses as well as those with narrower qualifications.
- self-employed grants for business. If you're self-employed , and members of NASE, you may qualify for a grant to small businesses every month, for up to $4000.
There are also lists of grants from Nav, Bench and even the federal government. Government grants have a lower chance of being approved, as they tend to fund only specific types of business.
What's the deal with the Small Business Association?
The SBA is an federal organization that is a federal agency. With a name like that, you would think they'd provide grants to... small companies. The majority of their funding funds state and local programs that help small-sized businesses.
If you're looking for grants from the government, you may get better results by exploring the state or local level. Its Economic Development Directory website won't connect you with grants directly, but it has a searchable and clickable map of each state that can connect you to a number of local resources.
Small-business loan sources
The federal mall mall loan business program includes several choices that aren't suitable for the majority of companies. However, the 7a plan is the most popular oneand merits consideration for small-scale business financing.
Go get 'em!
If you're seeking ways to boost your new or existing business a financial boost, hopefully you're now feeling a bit more inspired, motivated and educated.
Here's your plan of action:
- Update your business plan.
- Find resources that appear appropriate for your company and circumstances.
- Find the small business grants and financing choices that offer you an opportunity to win.
- Speak to your trustworthy advisors and mentors, if you have them.
Please note that when using + Stripe Capital, all loans are made through Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC. All loans subject to approval by the credit bureau.