Start Guide to eCommerce Business Grants & Loans
Beginning a new business can be an exciting moment in the course of. Expanding a business is too, because it means the initial plan will pay dividends. One of the major obstacles to both is funding -- having the money to begin or expand. There's good news, with a little digging there are small business loans and grants opportunities.
Just need some guidance on where to look. You've come to the right place.
What is the difference between small-business grant and loan?
Small business grants are in essence cash for free. You don't need to return it ever. The majority of grants come with stipulations as well as restrictions on who will win the grant, and how the money is used. Additionally, they usually require a cumbersome application process, and they are tax-deductible. IRS usually considers grants to be a form of business income therefore, it's tax-deductible.
A small business loan which is sometimes referred to as financing, the amount of money given to you that you must eventually pay back as you would a home or car loan. Some small business loans charge interest, while others charge a flat fee.
Small business loan types
There are basically three types of small business financing:
- A debt financing means an institution gives you cash and requires you to pay it back generally with interest and according to a predetermined schedule. In some cases, they may also require a form of collateral so if you default on your loan they seize the asset you assigned to it.
- Equity funding is when another company or partner offers you a loan as a trade in exchange for a portion of ownership in the business. Usually you'll pay the lender a portion of your revenue going forward, and you lose some autonomy because you've now got the benefit of a business associate. The loan will typically be not a cost of borrowing.
- Revenue-based financing is when you take the loan but return it with a share of your revenue, not a fixed monthly installment. More details will be provided later when we talk about Payments + Stripe Capital and Wayflyer.
However, within these areas, there are some variants. A majority of loans originate from banks. Some may be made available through the government. Others come from specialized private businesses.
Fundera provides an terrific resource to learn more about small business financing. They even list specific banks and their credit scores that they need. Certain lenders and banks offer loan options for specific situations they may find relevant to your needs. Learn more about these options of financing at Fundera:
- Equipment financing: a loan that pays for a piece of equipment
- Short-term business loan: the perfect solution for fast turnarounds and immediate needs
- Merchant cash advance is a variant of revenue-based financing
- Startup loans: financing given specifically to new companies
- Business line of credit A flexible loan that allows you to access funds when the need arises
- SBA loans: financing through the Small Business Administration, including microloans
Things to take into consideration when seeking small-scale business finance
Three main aspects you need to consider before applying or accepting an offer of a company loan are ownership control and risk.
For equity-based loans, as an example, you're able to give up an amount of ownership of your business, and you have less control over decision-making. However, they typically don't have any interest and they're risk-free.
Small firms: introduction + Stripe Capital
Access to financing can fortify and fuel your growing business, helping you expand and grow faster. Fast, flexible finance, Stripe Capital enables U.S.-based companies to invest in growth and help stabilize cash flow.
With and Stripe the loan offer is offered by Stripe's bank partner, Celtic Bank, based upon factors like your shop's sales as well as its experience in payments. The application isn't lengthy and no consumer credit check.
When you've received an offer by email or through your Dashboard messages, you are able to select the size that's right for you and submit the application in moments. For approved companies, funds usually arrive in as short as one working day.
In contrast to the loans that are offered by the traditional banking institutions, + Stripe Capital charges only one fee that is fixed, which is not subject to changes. That means there are no interest charges or late fees to be concerned about. Also, repayment is made automatically with a predetermined proportion of your transactions and is dependent on your revenue. A fixed percentage will continue 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 10% of the amount. That means your total loan obligation is $22,000. This is a loan amount of $20,000 with a loan cost of $2,000.
For our instance, Stripe Capital has established an interest rate for payback of 12percent. It means that each day, Stripe Capital is able to automatically deduct 12% of income from your account that month until the loan is fully paid off. This can be beneficial to you as it implies that your payments will increase depending on your revenue, so your monthly payments won't over your revenue. If you don't earn any revenue for a specific month, you don't get a any payment.
Imagine that one day you earn $900 in revenue, and on the next day, you make $1,300. The first day (assuming a 12% payment) would be $108, while on the following day, the amount would be $156.
A second low-risk eCommerce business finance choice: Wayflyer
In lieu of interest, Wayflyer offers a flat fee. Because it's a income-based loan, you're not at a risk of going into default, because revenue-based loans make the payments each month based on the amount of income that your business produces.
Types of small business grants
Unlike loans, which are quite simple to grasp, grants can be hard to find and navigate through all the conditions and limitations.
In general, there are two kinds of grants: grants from government agencies and private grants. Private grants are usually provided by foundations, businesses, or companies.
Grants are available for various types of extremely special situations and kinds of business that include:
- Awards for contest winners
- Scientific research companies
- Businesses owned by women, minorities or veterans
- Businesses in rural and agricultural industries
- Health and beauty businesses
- There are there are many more...
If you visit websites like Grantwatch that requires a cost for all specifics of a grant you'll find a myriad of possibilities that are updated regularly. But before your mouth starts flowing, keep in mind that you're not eligible for many of those grants, because they can be specific to situations such as those mentioned below.
Here are some sources to get more grants in the next few moments.
Applying for small business grants
If you're planning to apply for a small business grant, your first step is to narrow down your search around grants that your company is actually eligible to apply for. You don't need to fill with a lengthy application for a small business grant you have no chance of winning because you don't meet the requirements.
If, for instance, you're part of minorities, you'll be able to make an application for several small-business grants for minority businesses. It's more likely to be successful of winning them than general grant because there'll have less competition because those grants were created specifically for businesses like that of yours.
Next, even for existing businesses, you're going to need a professionally written business plan, because most grant applications have very precise concerns.
They want to understand why you are in need of this grant.
They would like to be sure that they are funding an effective business idea or expansion with strong potential as well as a reason in granting the grant. If you haven't revised your business plan in a long period of time, it's a good idea to start by updating your plan.
If you're operating an existing firm, you'll want updated information on your annual revenue, number of employees, the Employer Identification Number (EIN), and other basic data.
After that, write your pitch and then set aside time to answer each of the questions specific to each grant application.
Small business loan applications
The process for applying for a loan for business depends greatly on the type of loan you're pursuing.
If you're going for an federal small-business loan like the 7a credit is quite a different approach than going through a bank. Usually, there are more hoops to jump through in order to obtain government-backed financing. navigating the maze online isn't easy. Federal loans might be easier to qualify for and therefore could provide a better alternative to bank loans.
As you saw earlier, there are quite a few types of small-business loans, and the Fundera website lists specific banks and entities which offer the various types.
Prior to applying for small-business loan, it is important to know:
- Credit score
- The reason you require the loan
- Your average monthly revenue
- The sum you're looking for
- The plan you have for paying it back
Places to find small business grants and loans
Be prepared, as you'll find a wealth of information for this. They differ in their accessibility and ease of navigation.
- The Nav Small Business Grant contest. Nav awards a $10,000 grant to small-sized businesses each quarter. There is also a runner-up grant prize, to any companies that participate and are successful in winning their contest. The grant is almost without limits.
- FedEx grant contest. FedEx runs their contest multiple times per year, and the winners also receive a print services credit as well as a site audit and other perks. The highest prize is $50,000.
- Visa Global Innovation Grant. Visa's grant program has certain requirements that are more stringent that the previous two contests, but they choose four winners every year.
- Grantwatch and Opengrants. These are fee-based grant-finding services which are excellent places to find small, targeted grants that are otherwise difficult to locate. It is possible to search for grants through the location of your choice, the kind of grant, business type, and other parameters.
- US Chamber of Commerce grants. Another great resource for grants of all kinds. And it includes a nice checklist of general small business grants which are open to all kinds of businesses as well as those that have a more limited scope.
- Self-employed business grants. If you're self-employed , and members of NASE and are eligible, you could have the opportunity to apply for a small business grant each month, which can amount to $4000.
Additionally, there are lists of grants from Nav, Bench, and government agencies like the the federal government. The grants of the government are less likely to be eligible. chance of being approved, as they are primarily used to finance very particular types of businesses.
What about the Small Business Association?
The SBA is an federal organization that is a federal agency. With the name one would assume they'd provide grant money in support of... small-sized businesses. However, the majority of their funds is used to fund local and state initiatives for small and medium-sized enterprises.
If you're looking for grants from the government, you may have better luck looking at the state and local levels. The Economic Development Directory website won't connect you with grants in the first place, however it has clickable maps that can be searched and searched of each state that can connect you to many local sources.
Small business loan resources
It is the federal mall mall business loan program offers a variety of options that won't be useful to the majority of companies. But the 7a program is the most popular one, and that one merits consideration if you want small business financing.
Go get 'em!
If you're searching for ways to boost your new or existing business the financial edge, I hope you're feeling more motivated, energetic and well-informed.
Here's what you can do:
- Update your business plan.
- Explore the resources that seem to fit your business and circumstances.
- Look for small business grants and financing alternatives that give you an opportunity to win.
- Speak to your the most trusted mentors and advisors they are available.
Please note that when using + Stripe Capital, all loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank that is a member of the FDIC. All loans subject to credit approval.