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Everything You Need to Know About Small Business Loans and Grants in 2020

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Everything You Need to Know About Small Business Loans and Grants in 2020

Small businesses are the bread and butter of our economy. They help support local growth and create much-needed jobs. Unfortunately, small businesses don’t always get the same amount of support from their community. That’s why small business loans and grants are becoming more and more popular. They help keep the businesses we rely on everyday operational, even during an economic crisis.

If you’re a small business looking for some financial assistance, loans and grants are great options. However, it can be difficult to find the right solution for your unique situation. Additionally, navigating all the rules and stipulations can be confusing.

Below we have compiled a list of answers to some of the most common questions small business owners have about loans and grants. We’ve also included some helpful resources to help you get started with your applications, as well as a starter list of popular loans and grants you can apply for.

Small Business Loan vs. Small Business Grant

The main difference between a business loan and a business grant is that you don’t have to pay back grants. A limited number of loan programs do offer loan forgiveness under certain stipulations, but for the most part they do have to be paid off.

When to Choose a Loan

Loans can be extremely helpful if you are experiencing a lull in business but have a strong reason to believe that a boom will follow. A great example of that is what we are currently experiencing with the Coronavirus.

By opting for a small business loan, you can keep your business open and your employees on the payroll. This makes it much easier to ramp up production and sales when business picks back up.

Loans also have fewer qualifications and stipulations for use, so they’re great for a business that needs flexible financing options. Revolving loans can also be useful if you’re in need of a safety net, rather than a large lump sum of cash.

When to Choose a Grant

Grants are sums of money provided by the government or another organization that don’t have to be paid back. These aren’t typically awarded to startups, rather they are saved for established businesses.

Each grant will have different criteria, and it is often specific. Funding can only be used for specified purposes, so grants are ideal for a business that has a particular need in mind.

Qualifications for Loans and Grants for Small Businesses

Qualifications for loans and grants are going to vary based on the issuer. However, there are some general guidelines you’ll want to make sure you meet before you invest more time into research. These are typical of most loans and grants, but there are exceptions.

General Qualifications for Small Business Loans

When evaluating your chances of approval for a small business loan, Business says these six factors could tilt the scale in your favor:

  • Good business credit
  • Low debt-to-income ratio
  • Being established for at least two years
  • The existence of collateral
  • Good personal credit
  • Being a part of a thriving industry

General Qualifications for Small Business Grants

The SBA (Small Business Association) issues the majority of small business grants, and they have a list of prerequisites you must meet to qualify. For the most part, small businesses are considered to have 500 or fewer employees.

Your business must also already be established. A small business grant will not be approved by the SBA for startups or business expansions (startups are eligible for many private grants, though). Certain federal grants are only available to non-commercial businesses, so keep that in mind.

Popular Large Grants and Loans for Small businesses

You can search for specific grants online and discuss loan options with local banks, but we’ve compiled a list of popular loans and grants available to small businesses during this trying climate.

The CARES Act

The CARES Act is less of a grant and more of a program. It allows businesses to defer the Social Security taxes they owe for their employees. This can give your business the relief it needs to keep employees on the payroll during the coronavirus pandemic.

The Paycheck Protection Program PPP

The Paycheck Protection Program issues small business loans so that employers can continue providing paychecks to employees during COVID-19. The federal government has promised loan forgiveness to employers who keep employees on the payroll for at least eight weeks.

The funds are also restricted to three areas of use: payroll, mortgage interest, and utilities.

How to apply to receive PPP

Applications for the Paycheck Protection Program PPP are processed locally through SBA approved lenders. Your local banker should be able to assist you with the entire application process. Federal Credit Unions and Farm Credit Systems Institutions are also authorized to accept applications.

Who is eligible for PPP

The following requirements are listed for businesses seeking to participate in the Paycheck Protection Program:

  • Employ 500 or fewer employees OR
  • Have a maximum tangible net worth of less than $15 million OR
  • Have a net income of less than $5 million for the last two years

Business Specific Grants

Large federal and state loans and grants aren’t the only options for small business funding. There are a ton of niche-specific grants available nationwide from public and private organizations. You can search the national grant database online, but here are a few popular grants to get you started.

Eileen Fisher Women-Owned Business Grant

This grant is for women-owned businesses that employ at least 51% women. The clothing retail store awards 10 business up to $100,000 each year. With the current COVID-19 crisis, this could be the perfect year for you to apply.

The StreetShares Foundation Veteran Business Grant

This grant offers up to $5000 to each recipient based on the quality of their business model. The grant is geared toward veterans and active service members and their spouses who are looking to start a new business.

Nav’s “Legitify Your Small Business” Grant

If you and your business have personality, then this grant should go to the top of your list. Their only requirement for this $10,000 grant is that you make yourself shine in your application.


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