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The UPS Store Small Business Blog
  • 28 March 2022
  • Leo Covey

A Resource of Riches: Grants, Loans and Funding for Small Businesses

Cash is the lifeblood of any small business. From a day-to-day perspective, it’s necessary to pay for salaries, equipment, supplies, office space, vendors and more. When the pandemic arrived, many small businesses suddenly faced a cash shortfall as revenue streams evaporated. To get through that tough period, many small businesses looked for grants, loans and funding to recover some semblance of liquidity.

Beyond recovery, cash is also vital if you want to scale outward for growth, be it adding new personnel, expanding your products or services, or tackling new markets.

The good news is there’s money out there for the taking. You just need to know where to find it and what trees to shake. Here are some tips to consider as you start to research your own approach to grants, loans and funding for your small business.

First, what’s the difference between a loan, a grant and funding?

While there are some similarities between grants, loans and funding, the differences are worth noting. A loan is provided by a bank or private lender with the intention that it will be paid back with interest. A grant, on the other hand, is an infusion of cash that doesn’t have to be paid back. Because grants are essentially free money, they are rarer and harder to come by. Other types of funding can involve trading equity of your company for an offer of cash. Which one is right for you? The answer depends on what kind of leverage you are willing to take on as a small business owner.

SBA grants, loans and funding

The U.S. Small Business Administration (SBA) offers funding in the form of loans, investment capital, disaster assistance and grants. Their robust online presence can provide you with a myriad of funding opportunities based on your small business’ unique needs. If you’re a small business affected by a disaster, the SBA may help you with a direct loan. They also work with third-party lenders to set guidelines and reduce lender risk, which makes it easier for small businesses to get access to funding. Grants are available for specific types of small businesses, specifically for small businesses involved in scientific research and development (as of this writing).

Crowdfunding for loans

Over the past decade, crowdfunding has evolved from a novel approach into a legitimate stream of capital loans for small businesses of all shapes and sizes. The benefits of crowdfunding sites like Indiegogo or Fundable are real. Rather than pitching a bank or an angel investor, you can pitch thousands of potential investors at scale and get the capital loans you need based on how your small business story resonates with them. Before committing to a platform, research the crowdfunding site that gives you the best mix of benefits. Consider the reputation of the site, the fees involved and the customer service provided. Then start shaping your business story to appeal to their pool of potential lenders or investors.

3 Fs (Friends, Family, Funding)

If you are comfortable mixing your business life with your personal life, access to a loan or equity funding may be closer and easier than you think. You can ask friends and family for a loan, paid out over time. Or, if you are open to the idea, you can invite them to invest in your small business, which would give them equity in the business and a share of the profits. Regardless of which approach you take, be sure to formalize the arrangement with proper paperwork — even though you are dealing with friends and families, you want to protect all parties involved.

Funding through additional partners or shareholders

Making the jump from sole proprietorship to a more sophisticated business structure can provide you with the funding options you may be looking for. Whether you form a partnership, a limited liability corporation (LLC) or an S corporation, you are making the choice to give up some level of ownership of your company in order to fund it with capital provided by partners or shareholders. Talk to attorneys, tax experts and financial advisors to find the right funding option for you and your small business.

Grants provided by businesses

With the struggles of the pandemic, small businesses have enjoyed a moment in the spotlight, and the world at large has offered their support. At any given time, major brands and organizations are rolling out programs to support you and your peers through grants, contests, sweepstakes and other similar promotions aimed at bolstering your bottom line. Finding these promotions is as simple as using Google; search for terms like “small business sweepstakes” or “grant contest.” They’re out there, waiting for creative submissions and stories that will capture the imagination of the world. Who knows, you may even get a little fame with your fortune.

Good luck in your search for grants, loans and funding for your small business. As always, The UPS Store® is here to help connect you with the right resources to help you grow your small business.

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