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For business owners with no or poor credit, traditional bank loans may be out of reach. In these cases, your search for a business loan may include looking at alternative lenders and Community Development Financial Institutions (CDFIs). Small business grants may also be worth pursuing – especially since you do not have to repay the grant money you receive. Each of these options is very different, so it pays to do your homework to see if one is right for you.
Business funding from grants
What is a small business grant?
Often overlooked, grants can be a source of funding for some niche industry start-ups that provide a specialized product or service, or for businesses that are owned by people a grant-giving institution is looking to support. For example, business grants might be available for minority-owned or women-owned businesses or for a business with a mission that aligns with the grant-giving institution.
Benefits of a business grant
Grant funding is provided by a business, organization or individual for a designated purpose, and this funding is not paid back. As a grant recipient, your business can gain credibility from association with the individual or organization that provides the grant. In addition to funding, the organization providing the grant may also be able to provide specialized support and training.
Drawbacks of business grants
The grant application process can vary for each type of business grant and grant applications often require significant work as the information you provide will be compared against other grant applicants. Also, the decision may take some time and there may be conditions on how the funds can be used. Some grants are one-time awards – these tend to be smaller in size and not recurring year after year. Other grants may provide funding in phases with clear milestones that need to be achieved before additional funds can be received.
Want to learn more? Check out Grants.gov† and Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)† programs.