What's the Difference Between a Grant and Loan?
When it comes to financing your small business, there are two main options: loans and grants (finding investors is another option, but we can get to that in another post).
Loans are borrowed money that you have to repay, with interest. Grants, on the other hand, are free money that you don't have to repay.
So, which is right for you? It depends on your individual circumstances. Here's a look at the pros and cons of each option to help you decide.
Loans
Loans are a popular way to finance a small business because they are relatively easy to get. You can apply for a loan through a bank, credit union, or online lender. The amount you can borrow will depend on your income, assets, and credit score.
Loans have to be repaid, with interest. The interest rate on a loan will vary depending on the lender and your credit score. You'll usually have to make monthly payments, and the loan will have a fixed term, meaning you'll have to repay it all within a certain number of years.
There are both pros and cons to taking out a loan. On the plus side, loans can give you access to a large amount of money that you can use to pay to launch, grow, or expand your business. Loans can also help you build your credit history.
However, there are also some potential downsides to loans. First, you'll have to repay the loan, with interest. Second, loans can have a negative impact on your credit score if you don't make your payments on time.
Grants
Grants are a type of financing that you don't have to repay. They are usually awarded based on financial need or merit. Grants are available from a variety of sources, including the government, private foundations, and corporations.
Grants are a great way to finance your business or startup without taking on debt. They can help you fund start up costs and other expenses and avoid the hassle of repaying a loan. However, grants can be competitive, so it's important to apply for as many as you qualify for.
So, which option is right for you? It depends on your individual circumstances. No matter which option you choose, it's important to do your research and understand the terms and conditions before you sign anything.