Beginning Guide to eCommerce Business Grants and Loans
Beginning a new business can be an exciting moment in the course of. Growing a business can be exciting too as it indicates that the idea you had initially thought of is paying dividends. But one of the biggest hurdles to both is money and having enough capital to launch or expand. It's great news that with a little digging there are small business loans and grants opportunities.
Just need some help knowing where to look. You've been to the right spot.
What are small business loan and grants?
Small business grants are essentially free money. You don't need to return it never. But, the majority of grants have conditions and limitations on who is eligible to receive the grant, as well as how the money is used. They also usually have a cumbersome application process in addition to they are tax-deductible. IRS usually considers grants to be business income, meaning that it is tax-deductible.
A small business loan also known as financing the amount of money provided to you and which will eventually be repaid, just like a house or auto loan. Small business loans can be charged the interest while some require a flat rate.
The types of small-business loans
Essentially, there are three forms of small-business funding:
- Debt financing means an institution gives you cash and requires you to repay it typically with interest, according to a predetermined schedule. Sometimes they also want an alternative form of collateral, so that if you default on your loan they will take the collateral you have assigned to them.
- Equity financing is when another business or partner gives you a loan as a trade for partial ownership of the company. In most cases, you pay the lender a portion of your income going forward. In addition, 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 an advance, however you pay it back as a share of your revenue instead of a set monthly installment. This will be discussed more as we get into Payments + Stripe Capital and Wayflyer.
But within those categories, you can find some variations. A majority of loans originate from banks, but some can be given through the government and some are provided by private companies that specialize in the field.
Fundera is a fantastic resource for learning all about small business financing. The site also provides a list of specific banks and the credit scores they require. A few lenders and banks provide loan options for specific situations which may apply to your needs. You can find out more about each of these financing options at Fundera:
- Equipment financing: A credit that is used to pay for a piece of equipment
- Business loans for short-term duration: an alternative for rapid turnarounds and immediate needs
- Merchant cash advance: a variation of the revenue-based finance
- Start-up loans: funding available specifically to new companies
- Credit line for business: a flexible loan that makes money available as you require it
- SBA loans: financing via the Small Business Administration, including microloans
Factors to consider when pursuing small business financing
The three most important factors you need to consider prior to submitting or accepting an offer to take out a small business loan are ownership, control and risk.
When you take equity-based loans for instance, you surrender an amount of ownership of your business, and you lose some control over the decision-making. These loans typically don't have any interest and they're not risky.
A loan for existing small businesses: introducing + Stripe Capital
The ability to finance can strengthen and boost your expanding business, helping you expand and scale more quickly. With fast, flexible finance, Stripe Capital enables U.S.-based companies to fund growth as well as help stabilize the flow of cash.
With and Stripe loans, you can get extended by Stripe's banking partner, Celtic Bank, based upon factors like your shop's sales as well as its experience of payments. The application isn't lengthy and no consumer credit check.
If you've been offered a deal through email or Dashboard messages, you are able to select the size that's right for you and submit the application in moments. In the case of approved businesses, money typically arrive in as little as one working day.
Unlike many loans offered through conventional banks + Stripe Capital charges an unchanging fee and the fee is never subject to change. That means there are no interest charges or late fees that you have to fret about. The repayment process is also automated, through a fixed proportion of your transactions and adjusts to your daily revenue. A set percentage of your sales will continue to be deducted until the entire amount due is paid.
Consider, for instance, that you get a $20,000 loan through Stripe Capital, and they provide you with 10% of the amount. That means your total loan obligation is $22,000. This represents a loan value of $20,000 with a loan fee of $2,000.
For our instance, Stripe Capital has established a payback rate of 12.5%. This means that every the day Stripe Capital can automatically take 12% of your income from your account this month, until the loan is fully paid to. This is advantageous to the customer as it ensures that your payments will increase depending on the amount of revenue you earn, meaning the amount you pay will not over your revenue. If you don't earn any revenue during a particular month, you don't get a amount to pay.
Let's say that on one day, you generate $900 in revenue, then the following day, you earn $1300. Your payment on the first day (assuming a 12% payment) will be $108 and on the second day, it would be $156.
Another low-risk eCommerce business financing alternative: Wayflyer
Instead of interest, Wayflyer offers a flat fee. And because it's a revenue-based loan, you're not at a chance of default, because revenue-based loans adjust the payment each month based on how much income your business produces.
The types of small business grants available
Contrary to loans, which can be fairly simple to understand but grants can be hard to find and understand all rules and regulations.
In general, there are two kinds of grants: grants from government agencies and private ones. Private grants are usually provided by foundations, businesses, or companies.
Grants are available for any of the many very particular situations and types of businesses, including:
- Award for winners of contests
- Companies that conduct scientific research
- Companies owned by women, minorities or veterans
- Rural and agricultural businesses
- Businesses in the fields of beauty and health
- and numerous others...
When you browse an online site such as Grantwatch that requires a cost if you want all the details of a grant, you'll see thousands of options, updated frequently. However, before your mouth begins watering, remember that you're unlikely to be eligible for a lot of these grants, because they can be for very specific situations similar to those described below.
We'll show you some resources for grants that are more extensive in the next few moments.
Small business grants for applicants
Before you apply to receive a small business grant, the first task is to narrow down your options to grants you actually qualify for. There's no use filling an extensive application form for a small business grant there's no way to be sure of being awarded because you do not meet the requirements.
In the case of, say, being part of a minority group that you belong to, you'll have the opportunity to submit a variety of minorities small business grants. There's a higher chance of success at those than the general grant because there'll have less competition because these grants were made specifically for small businesses similar to that of yours.
For existing firms, you'll need a professionally written business plan because the majority of grant applications ask very specific inquiries.
They would like to know why you need this grant.
They'd like to ensure that they are funding an effective business idea or expansion with a high-potential and that meets their reasons for offering the grant. If you haven't revised your business plan for some duration, you might want to start by updating your plan.
If you have an existing firm, you'll want up-to date information regarding the amount of revenue you earn each year, your number of employees as well as your Employer Identification Number (EIN), along with other fundamental information.
Then, nail down your pitch, and make sure you have time to address all the specific questions on the grant applications.
Applying for small business loans
The process for applying for a loan for business depends heavily on which type of loan you're looking for.
If you're seeking an federal small-business loan like a 7a credit it will require a very different process as compared to banks. Usually, there are more hoops to jump through in order to obtain government-backed financing. navigating the maze online can be frustrating. But, federal loans can be easier to get, so it may provide a better alternative to a bank loan.
Like you have seen earlier, there are a variety of kinds of small-business loans, and the Fundera site lists the specific institutions and banks that offer each type.
Prior to applying for small-business loans, you want to know:
- Credit score
- Why you need the loan
- Your average monthly revenue
- The quantity you're after
- The plan you have for paying to repay it
Small business-friendly places to look for grant and loan sources.
Get ready, because there's a deluge of resources to help you with this. They range in terms of the ease of use and navigability.
- Nav small business grant contest. It awards a $30,000 grant for small businesses every quarter, plus a runner-up grant award, to companies that participate and win their contest. The grant is almost without limits.
- FedEx grant contest. FedEx has their grant contest running multiple times per year, and the winners also receive an account for printing services as well as a site audit along with other perks. The top prize is $50,000.
- Visa global innovation grant. The grant competition offered by Visa has some additional requirements that the previous two contests, but they choose the winners each year.
- Grantwatch and Opengrants. The services are fee-based and grant-finding that are great places to find smallergrants, which are based on niches that are otherwise hard to find. Search for grants by location, type of grant, business type, and other parameters.
- US Chamber of Commerce grants. This is another great source with all kinds of grants. And it includes a nice list of general small business grants that are available to all kinds of businesses and also those with narrower qualifications.
- Business grants to self-employed. If you're self-employed and are a member of NASE, you may qualify for a small-business grant every month, for up to $4,000.
There are also lists of grants provided by Nav, Bench and even government agencies like the the federal government. Government grants have a lower likelihood of qualifying, since they typically only fund specific types of business.
What about the Small Business Association?
The SBA is a federal agency that is a federal agency. With such a title, you would think they would offer grant money in support of... small companies. However, the majority of their funds funds state and local initiatives for small and medium-sized enterprises.
For government-funded grants, you may get better results by looking at the state and local levels. Its Economic Development Directory webpage won't direct you to grants directly, but it does have an interactive map searchable by keyword, by state, that will connect you with numerous local resources.
Small-sized business loans
It is the federal s mall loan business program has a number of choices which won't benefit most companies. The 7a loan program is probably the most well-known oneand merits consideration in case you are looking for small-scale company funding.
Go get 'em!
If you're seeking ways to boost your existing or new business an extra boost in revenue, we hope you're now feeling a bit more inspired, motivated and educated.
Here's your plan of action:
- Update your business plan.
- Explore the resources that seem to be appropriate for your particular business circumstances.
- Look for smaller business grants and finance alternatives that give you a chance at winning.
- Speak to your trustworthy advisors and mentors, if they are available.
Be aware that, with + Stripe Capital, all loans are made by Celtic Bank, a Utah-Chartered Industrial Bank that is a member of the FDIC. All loans are subject to approval by the credit bureau.