Beginning Guide for eCommerce Business Grants & Lending
Beginning a new business can be the most exciting time in your life. Expanding a business is too since it signifies that your initial idea will pay dividends. However, one of the main obstacles to both is funding -- having the money to begin or expand. There's good news, by doing a bit of research it is possible to find small business grants and loan opportunities.
It's all you need is a bit of help knowing where to look. For that, you've been to the right spot.
What is the difference between small-business grant and loan?
A small business grant is essentially free money. This means that you do not have to return it ever. However, most grants come with stipulations and restrictions regarding who can receive the grant, as well as how the money is used. Additionally, they usually require extensive application procedures as well as they are tax-deductible. IRS typically 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, money given to you that you must eventually pay back, just like a house or car loan. Small business loans can be charged the interest while some have a fixed fee.
The types of small-business loans
In essence, there are three types of small business funding:
- The term "debt finance" means an institution gives the borrower money, and then you are required to pay it back, usually with interest on a set schedule. In some cases, they may also require a form of collateral so when you fail to pay your loan they seize the asset you assigned to them.
- Equity funding is when another partner or business entity gives you a loan as a trade to a share of the business. In most cases, you pay them a percentage of your earnings going forward. Also, you're deprived of some autonomy since you've now got the benefit of a business associate. However, the loans are typically not a cost of borrowing.
- The term "revenue-based" financing is when you take a loan, but you return it with part of your earnings instead of a set monthly amount. This will be discussed more in the future when we discuss Payments and Stripe Capital and Wayflyer.
But within those categories, you can find various variations. Most loans come from banks, but some may be made available through the government. Others come are provided by private companies that specialize in the field.
Fundera is a fantastic resource to learn more about financing small-scale businesses. It also lists certain banks along with their credit scores that they need. A few lenders and banks provide loan options for specific situations they may find relevant to your needs. Learn more information about the financing options available at Fundera:
- Equipment financing is a type of loan to finance an item of equipment
- A short-term business loan is an alternative for rapid turnarounds and immediate needs
- Merchant cash advance is a alternative to the revenue-based finance
- Start-up loans: funding available especially for businesses that are just starting out.
- Business line of credit: a flexible loan which allows money to be accessed when you require it
- SBA loans: loans via the Small Business Administration, including microloans
Things to take into consideration when seeking small business financing
The three most important factors that you should consider prior to submitting or accepting an offer of a company loan are ownership control and the risk.
For equity-based loans, as an instance, you surrender certain percentage of the ownership stake in your business, and you lose control of making of decisions. These loans typically don't have any interest and they're low risk.
A loan to existing small firms: introduction + Stripe Capital
Finance can help strengthen and boost your expanding business which allows you to grow and scale more quickly. Through flexible, fast finance, Stripe Capital enables U.S.-based companies to fund growth as well as help stabilize cash flow.
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 of payments. It's not a lengthy process to apply and no consumer credit check.
Once you receive an offer by email or through your dashboard messages, you can choose the right size for you and submit the application in minutes. If approved, the funds typically arrive in as little as one business day.
Unlike many loans offered through conventional banks + Stripe Capital charges only one fee that is fixed, and that fee never changes. This means that there aren't interest charges or late fees that you have to fret about. The repayment process is also automated, through a fixed percentage of your transactions, and is dependent on your revenue. 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 through Stripe Capital, and they provide you with 10% of the amount. The total debt is $22,000 which represents a loan value of $20,000. You also pay a fee of $2,000.
In the example above, Stripe Capital has established an interest rate for payback of 12percent. This means that every day, Stripe Capital will automatically subtract 12% of the revenue from your account for this month, until the loan has been paid off. This is advantageous to you as it implies that the amount you pay will rise and fall based on the income you earn. Therefore, your monthly payments won't surpass your earnings. If you make no revenue in a given month, you don't get a amount to pay.
Imagine that one day you earn $900 in revenue, then the following day, you make $1,300. Your first day (assuming a 12% payment) would be $108, then on the next day, it would be $156.
A second low-risk eCommerce business finance option: Wayflyer
Instead of interest, Wayflyer has a fixed cost. Since it's a revenue-based loan, you're not at a possibility of falling into the position of default because these loans adjust the payment every month in accordance with how much revenue your company produces.
Types of small business grants
Contrary to loans, which can be fairly simple to understand but grants can be difficult to locate and understand all rules and regulations.
There are generally two types of grants: government grants as well as private grants. Private grants usually come from foundations, businesses, or companies.
There are grants for all kinds of very special situations and kinds of business which include:
- Award for winners of contests
- Scientific research companies
- Women-owned businesses are owned by minorities or veterans
- Businesses in rural and agricultural industries
- Beauty and health businesses
- and many more...
When you browse an online site such as Grantwatch, which requires a cost for all specifics of a grant you'll find a myriad of possibilities, updated frequently. But before your mouth starts getting watery, be aware that you're not eligible to receive many of the grants, because they can be specific to situations like those listed in the previous paragraph.
We'll give you some options for grants that are more extensive within a few minutes.
Small business grants for applicants
Before you apply for a small business grant, your first step is to narrow the grants your business actually qualifies to apply for. It's not worth filling an extensive application form for a small business grant there's no way to be sure of getting because you're not meeting the requirements.
For example, if you're part of a minority group and you're a minority, you can submit a variety of minority small business grants. You'll have a better shot in securing them than other grants, because there will have less competition because those grants were created specifically for businesses like ones like yours.
In addition, for established firms, you'll need a professionally written business plan because the majority of grant applications ask very specific concerns.
They want to know why you need this grant.
They'd like to ensure that their money is funding an effective business idea or an expansion that has a lot of potential as well as a reason in granting the grant. If you haven't revised your business plan for some time, you may want to start by updating your plan.
If you're operating an existing firm, you'll want updated information on the amount of revenue you earn each year, your number of employees, the Employer Identification Number (EIN), as well as other essential information.
Next, you must write down your pitch and then make sure you have time to address each of the questions specific to the grant applications.
Small business loan applications
The procedure for applying for a loan for business depends heavily on which type of loan you're pursuing.
If you're looking for a federal small business loan similar to one called a 7a loan it will require an entirely different procedure unlike a bank. There are usually many more hurdles to go through for government financing, and understanding the maze on the internet can be frustrating. But, federal loans can be more accessible to those who qualify which is why they could provide a better alternative to a bank loan.
Like you have seen earlier, there are quite a few variations of small business loans, and the Fundera website provides the specific institutions and banks offering each kind of.
When you are applying for small-business loans, you want to know:
- Your credit score
- What are the reasons you'll need this loan?
- Your average monthly revenue
- The amount you're seeking
- Your plan for paying the loan back
Where to locate small-business grant and loan sources.
Get ready, because there's a deluge of resources for this. They vary in 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 award, to companies that participate and are successful in winning their contest. This grant has almost no limits.
- FedEx grant contest. FedEx runs their contest multiple times throughout the year. the winners will also be awarded the benefit of a credit for print services as well as a site audit along with other perks. The highest prize is $50,000.
- Visa global innovation grant. Visa's grant contest comes with certain requirements that are more stringent in comparison to the other two and they pick four winners annually.
- Grantwatch as well as Opengrants. They are grant-finding companies that charge a fee that can be great to look for the smaller, niche-based grants that are otherwise hard to find. Search by location, 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. The site also has a comprehensive listing of small-scale general business grants available for all types of firms as well as those which have more specific requirements.
- Self-employed business grants. If you're self employed and a member of NASE then you might qualify for a grant to small businesses every month, for up to 4000 dollars.
Additionally, there are lists of grants provided by the Nav, Bench, and the the federal government. Government grants have a lower probability of qualification, because they tend to fund only specific types of business.
What is what is the Small Business Association?
The SBA is an agency of the federal government that is a federal agency. With such a title, you would think they would offer grant money for... small-sized businesses. The majority of their funding goes to local and state-funded programs that help small-sized businesses.
If you're looking for grants from the government for grants, you might be better off looking at the state and local levels. The Economic Development Directory page won't lead you to grants, but it does have an interactive map searchable by keyword of each state that can connect you to a number of local resources.
Small-sized business loans
It is the Federal mall mall business loan program has a number of choices that aren't suitable for most companies. However, the 7a program is probably the most well-known oneand merits consideration for small-scale business funding.
Go get 'em!
If you're seeking a way to give your new or existing business the financial edge, I hope you're now feeling a bit more inspired, motivated, and informed.
Here's what you can do:
- Make sure you update your business plan.
- Look through the options that may seem to fit your business and your current situation.
- Find the small business grants and financing alternatives that give you an opportunity to win.
- Consult with 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 approval by the credit bureau.