Starting Guide for eCommerce Business Grants & Lending
Starting a business is the most exciting time in your the course of. Expanding a business is too, because it means the initial plan has paid off. However, one of the main hurdles to both is money and having enough 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.
It's all you need is a bit of assistance in determining where to go. You've come to the right place.
What are small business loan and grants?
A small business grant is essentially unpaid money. This means that you do not have to return it at all. However, most grants come with stipulations as well as restrictions on who will win the grant, and what the grant is used. Also, most grants have a cumbersome application process, and the IRS usually considers grants to be a form of business income which means that it's taxable.
A small business loan which is sometimes referred to as financing, the amount of money given to you that you will have to repay the same way as a house or car loan. Small business loans can be charged an interest rate, while other loans charge a flat fee.
The types of small-business loans
Essentially, there are three kinds of small-business financing:
- A debt financing is when an institution lends you money and you have to repay it generally with interest and according to a predetermined schedule. In some cases, they may also require a form of collateral so when you fail to pay this loan, the lender can will take the property you entrusted to them.
- Equity financing is when a different partner or business entity gives you a loan in exchange in exchange for a portion of ownership in the company. Usually you'll pay an amount of income going forward. In addition, the business loses some autonomy as you've become a business partner. But the loan is typically free of interest.
- The term "revenue-based" financing is when you take an advance, however you return it with a share of your revenue instead of a set monthly amount. This will be discussed more as we get into Payments + Stripe Capital and Wayflyer.
But within those areas, there are some different types. The majority of loans are provided by banks. However, some loans may be made available through the government. Others come from specialized private businesses.
Fundera offers the fantastic tool for learning all about financing for small businesses. It also lists certain banks along with the credit scores they require. A few lenders and banks provide loan options for specific situations that may be relevant for you. Find out more about the financing options available at Fundera:
- Equipment financing is a type of loan to finance a piece of equipment
- Short-term business loan: an alternative for rapid turnaround times and for urgent requirements
- Merchant cash advance: a alternative to the revenue-based finance
- Start-up loans: funding available especially for businesses that are just starting out.
- Credit line for business: a flexible loan which allows money to be accessed when you require it
- SBA loans: Financing from the Small Business Administration, including microloans
Things to take into consideration when seeking small business financing
The three main factors that you should consider prior to submitting or accepting an offer for a small company loan are ownership control and risks.
With equity-based loans, for example, you give up an amount of ownership of the business you run, and have less control over taking of the decisions. These loans typically don't have any interest and they're not risky.
Small firms: introduction + Stripe Capital
Access to financing can fortify your business's growth by allowing you to expand and scale more quickly. Fast, flexible finance, Stripe Capital enables U.S.-based companies to fund growth as well as stabilize the flow of cash.
With and Stripe, loan offers are made by the bank partner of Stripe, Celtic Bank, based on variables like the sales of your business and its history of payments. It's not a lengthy process to apply or consumer credit checks.
If you've been offered a deal via email or in your Dashboard messages, you are able to pick the best size for you, and then apply within minutes. For approved companies, funds usually arrive in as short as a business day.
Contrary to many loans provided by conventional banks + Stripe Capital charges one fixed fee, which is not subject to changes. It means there's no costs for interest or late charges to be concerned about. Repayment also happens automatically, with a predetermined percentage of your transactions, and adjusts to your daily sales. A fixed percentage will continue to be taken out until the total owed is repaid.
As an example, let's say you obtain a $20,000 loan from Stripe Capital, and they give you 10% of the amount. This means that your total debt is $22,000 which amounts to a loan of $20,000. You also pay a cost of $2,000.
In the example above, Stripe Capital has established an interest rate for payback of 12%. It means that each morning, Stripe Capital can automatically subtract 12% of the earnings from your account this month, until the loan has been paid to. This is beneficial for you as it implies that the amount you pay will rise depending on the amount of revenue you earn, meaning your payments will never surpass your earnings. If you make no revenue during a particular month, there's no amount to pay.
Imagine that one day you earn $900 in revenue, then the following day, you make $1,300. The first day (assuming that you pay 12%) would be $108, then on the next day, it's $156.
A different low-risk business financing option: Wayflyer
Instead of interest, Wayflyer has a fixed cost. And because it's a revenue-based loan, there is no chance of default, because revenue-based loans make the payments every month in accordance with how much revenue your company earns.
Small business grants of various types
Contrary to loans, which can be relatively easy to comprehend however, grants are hard to find and comprehend all rules and regulations.
In general, there are two kinds of grants: those granted by government and private grants. Private grants are usually provided by foundations or businesses.
There are grants available for various types of extremely special situations and kinds of business which include:
- Awards for contest winners
- Companies that conduct scientific research
- Businesses owned by women, minorities, or veterans
- Agricultural and rural businesses
- Health and beauty businesses
- There are many more...
If you visit websites like Grantwatch and Grantwatch, which has a charge if you want all the details of a grant, you'll find a myriad of possibilities which are regularly updated. However, before your mouth begins watering, remember that you won't qualify to receive many of the grants, because they can be for very specific situations such as those mentioned above.
We'll give you some options to get more grants in a bit.
Small business grants for applicants
Before you apply for a small business grant, the initial step is to narrow your search around grants that you actually qualify for. You don't need to fill an extensive application form 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 an ethnic minority that you belong to, you'll have the opportunity to make an application for several minorities small business grants. It's more likely to be successful at those than the general grantsbecause there'll have less competition because these grants were made specifically for small businesses similar to that of yours.
For existing companies, you'll want to have a well-written business plan since most grants will ask you very specific concerns.
The applicants want to know why you need this grant.
They want to know they are 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 period of time, it's a good idea to do that first.
If you have an existing business, you'll also want updated information on the annual income, numbers of employees as well as your Employer Identification Number (EIN), along with other fundamental information.
Next, you must write down your pitch and then schedule time to respond to all the specific questions on every grant application.
The process of applying for small-business loans
The process for applying for a business loan is contingent heavily on which type of loan you're looking for.
If you're seeking the federal Small Business Loan like the 7a loans it will require quite a different approach unlike a bank. Usually, there are additional hurdles to cross to get government funding, and navigating the maze online isn't easy. Federal loans might be easier to get, so it may make a great alternative to a bank loan.
You've seen that there are a variety of kinds of small-business loans, and the Fundera website provides specific banks and entities offering each kind of.
Before applying for small business loans, know:
- Credit score
- Why you need the money
- Your average monthly revenue
- The sum you're looking for
- How do you pay the loan back
Places to find small business grants and loans
Get ready, because you'll find a wealth of information in this regard. They range in terms of accessibility and ease of navigation.
- The Nav Small Business Grant contest. Nav awards a $10,000 grant to small-sized businesses each quarter, plus a runner-up grant prize, to any business types that apply and win their contest. The grant is almost without limitations.
- FedEx grant contest. FedEx has their grant contest running multiple times a year. the winners are also awarded the benefit of a credit for print services, a website audit, as well as other benefits. The top prize is $50,000.
- Visa Global Innovation Grant. The grant competition offered by Visa has certain requirements that are more stringent that the previous two contests however they select the winners each year.
- Grantwatch along with Opengrants. These are fee-based grant-finding services which are excellent places to find smaller, niche-based grants that would otherwise be very difficult to locate. Search through the location of your choice, the type of grant, business nature, as well as other factors.
- US Chamber of Commerce grants. It is a great site with all kinds of grants. And it includes a nice checklist of general small business grants that are available to most types of companies, in addition to ones which have more specific requirements.
- self-employed grants for business. If you're self-employed , and an NASE member NASE then you might be able to apply for a grant to small businesses every month, for up to $4000.
Additionally, there are lists of grants from Nav, Bench, and those of the Federal government. Government grants have a lower probability of qualification, because they are primarily used to finance specific types of business.
What about what is the Small Business Association?
The SBA is an federal organization, and with the name, you would think they'd provide grants in support of... small-sized businesses. But most of their money funds state and local programs that help small-sized businesses.
So for government grants for grants, you might get better results by exploring the state or local level. The Economic Development Directory page won't lead you to grants directly, but it will provide a searchable and clickable map for each state. It will connect you with numerous local resources.
Small business loan resources
It is the federal mall mall business loan program includes several choices that aren't suitable for all firms. The 7a loan program is probably the most well-known one, and that one merits consideration for small-scale business financing.
Go get 'em!
If you're looking for an opportunity to provide 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.
- Explore the resources that seem to fit your business and circumstances.
- Discover small business grants and financing alternatives that give you the chance of winning.
- Talk to trustworthy advisors and mentors, if you are fortunate enough to have them.
Note that with + Stripe Capital, all loans are made by Celtic Bank, a Utah-Chartered Industrial Bank, a Member of FDIC. All loans are subject to credit approval.