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Are You Know What’s the Difference Between a Grant and a Loan?

Are You Know What’s the Difference Between a Grant and a Loan?

Small businesses can benefit greatly from both grants and loans. Here’s the difference between the two and popular funding options businesses should consider.

It can’t be stressed enough that acquiring funding can make or break a burgeoning small business. Funding can come in the form of various grants and loans ?— all of which can help boost inventory and invest in software, sales tools and more to unlock growth.

But when it comes to funding types, grants and loans are quite different. Small business owners seeking funding should clearly understand what separates these two types. Below, we’ll explain the difference and point you to some top options for both.

The difference between small business grants and loans

First, the easiest way to explain what separates grants and loans is that you have to pay back loans while you don’t need to pay back grants. Typically, a business that receives a grant goes through an application process where they show they qualify and then agree to spend the money in whatever way is specified by the grantee. But the businesses do not have to pay it back unless they violate the terms of the grant.

Loans are often easier to obtain than grants because the lender is typically motivated by receiving the amount of the loan back plus interest. Banks and credit unions that issue loans expect the loan to be paid back according to highly specific terms that are laid out to the borrower.

Loans and grant opportunities are available for nearly every subsector of ownership:

Top options for small business grants

When seeking out government-based grants, the best place to start is Grants.gov, a centralized online site to learn about and apply for federal grant opportunities from more than 20 agencies such as the Department of Justice and the Department of Health and Human Services. (more…)

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