Tips for Funding Your Small Business with Grants and Loans

For owners looking to start or grow a small business, funding can be crucial. In fact, capital is often the difference between a company whose products or services take off and offerings that never see the light of day or, at best, don’t achieve their full potential. 

The good news is that you don’t need a large personal “nest egg,” capital from the sale of a prior venture, etc., to obtain the money to start a business or take an existing one to the next level. There are many loan and grant programs for small businesses you can leverage.

With a little research, guidance from a licensed financial planner, and outreach to the loan or grant provider, you may be able to secure vital funds for your company. 

“We don’t fund small businesses, but we address their insurance needs and see every day how important access to capital is to them,” says Peter Shelley, my colleague and president at biBERK, a Berkshire Hathaway Direct small business insurance company. “While there’s no guarantee that your business will meet a particular grant or loan program’s requirements, there are so many out there that a bit of time and effort could uncover one or more that will serve your organization’s funding needs.” 

Grants vs. Loans

You’ll often see the terms “grant” and “loan” used together—including in this article. But it’s important to understand the difference. Grants are essentially gifts, with no requirement that you repay them. Of course, it’s critical to confirm that fact before accepting a specific grant!

Loans are sums you must repay. They come with terms and conditions, including the interest rate on the borrowed money.

So, if you find grants and loans for which your business is eligible, the former may be better. But even a small business loan with a reasonable interest rate can provide a cash infusion that’s extremely useful for a company.

Again, just be sure to talk with a licensed financial professional before accepting money from either type of program to understand how doing so affects your company.

Government Funding Programs for Small Businesses

Federal, state, and local government entities offer many types of loans and grants with various focuses and requirements. For example, the US Small Business Administration (SBA) provides several types of grants. Its website explains the process for obtaining them, and you can look for available assistance programs at SAM.gov.

The US Chamber of Commerce also has helpful information on grants and loans that benefit small businesses. Some of the programs it lists apply to small businesses generally, while others are specific. For example, there are programs for small businesses in healthcare, companies that are minority-owned, etc. Looking for targeted programs can be helpful, as they limit eligibility to certain types of companies, meaning you may have less competition for a loan or grant.

Private Sources of Small Business Funding

Companies, trade organizations, and others offer many types of funding for small businesses. For example, the list of entities offering grants includes companies like Verizon, FedEx, Visa, Venmo, and countless others.

Entities like the National Association for the Self-Employed (NASE) and similar organizations provide grants ranging from a few hundred to hundreds of thousands of dollars. Some groups make money available throughout the year, while others have grant “competitions” that accept applications during specific periods.

As with government grant and loan opportunities, private programs can be general or specific. A quick online search with terms like these will bring up long lists of options to review with your financial advisor:

●     Women-owned business grants/loans

●      Small business grants/loans for veterans

●      Grants/loans for minority-owned businesses

●      Grant/loan programs

●      Community foundation grants and loans

●      Grants/loans for business owners

●      Chamber of Commerce grants/loans

●      [Your industry] grants/loans

Given the many options available, it can be helpful to create a spreadsheet with details on the programs you want to apply for—the grant name, amount available, requirements, request deadline (if applicable), etc. But regardless of how you choose to pursue them, your business can likely obtain critical funding from one or more sources.

Non-Monetary Grants

Some entities offer grants in the form of resources like land or services rather than capital. Or they may offer a combination. For example, FedEx has a small business grant contest in which winners receive money and FedEx print credits from FedEx Office.

While you may be seeking funds, non-monetary grants can be just as valuable. Not only do they meet a need, but they also reduce your expense for the item or service, meaning you can earmark money saved for other initiatives. So, when a grant program provides products, services, etc., you should consider how your company might benefit.

Grant Fraud

While you don’t repay a small business grant like you would a loan, grants do come with certain requirements. Not surprisingly, failing to adhere to the conditions has consequences.

Specifically, if you commit grant fraud (e.g., you obtain a grant to start a business but instead use the money to pay for a vacation), you can be found guilty of crimes like embezzlement or theft. It’s also illegal to use bribes to sway grant program decision-makers.

“Grant programs for small businesses are created to help owners pursue their dreams, and that’s what the vast majority of recipients do,” adds Shelley. “The concept of grant fraud shouldn’t dissuade you from accepting money. It’s just another reason to review the information about a program carefully and talk with the offering organization and your financial advisor if you have any questions or need clarification about the requirements.” 

Find Your Funding Today!

From new business grants to loans for established organizations, there are countless programs for getting a financial boost for your company. Whether you require capital now or anticipate a need down the road, it’s wise to familiarize yourself with your options today.

Rakesh Gupta is chief operating officer at  biBERK, part of Warren Buffett’s Berkshire Hathaway company. biBERK specializes in commercial insurance for small businesses. In his role, Gupta focuses on simplifying the insurance buying experience using technology and process innovations that make it easier for small business owners to get the coverage they need.