Adequate funds are the lifeblood of every business. Funds are needed to pay day-to-day expenses including routine operating costs, inventory, and payroll, plus the purchase of equipment, real estate, and funding for growth. Available sources of funds are business grants and loans and alternative sources of funding. 

6 Differences Between Business Grants and Loans 

A business grant is an award of money to a business entity to help the business pursue its goals. Grants are awarded by federal, state, and local governments, corporations, non-profit and community organizations, foundations, and trusts. 

Business loans are funds acquired from various lenders with specific payback terms, including interest. 

While every granting organization and funding lender has its criteria for providing funds, the primary differences between business grants and loans are: 

  1. Grant funds do not need to be paid back to the granting organization. Loan funds do need to be paid back to the lender on a specific timetable, usually with interest. 
  2. The purpose of grant funds is to meet a goal. Funds are provided to benefit society or to promote the mission of the grantor. Loan funds are approved to help a business meet its financial needs. 
  3. Grant funds are awarded based on the requirements of the granting organization. Loan funds are distributed based on its defined terms of financial soundness. 
  4. The competition for grant funds is fierce. The availability of business loan funds is relatively large. 
  5. Many grants are designed to help business owners who have historically had difficulty getting traditional loans such as women, military veterans, and minority group members. Loans are granted to any business that can meet its financial application requirements. 
  6. There is no risk in receiving grant funds because there is no payback required. There is a risk with loans because if funds are not paid back there are financial penalties, including impairment of the business’ credit rating and risk of its assets. 

A grant may be a good source of funds if your business benefits the community or local society if you aren’t in any urgent need of funds, and if you are willing to accept the grantor’s requirements and restrictions. A loan may be the right solution for funding if you need money fast, if you want to control the use of funds, and if you have good financials to get lending approval.  

Business Loans 

The availability of business loans is plentiful from traditional sources. There are also attractive sources for alternative funding solutions for those who can’t get funding from banks. Be sure to research the different type of financing available to find the right fit for your business needs. 

Get Expert Alternative Financing Assistance 

Contact cont. We offer a portfolio of alternative funding solutions for companies that can’t get funding from banks including business lines of credit, merchant cash advances, and commercial real estate funding. We focus on businesses that have been active for 2+ years and are looking to grow to the next level. If you are facing a funding deficit, we are ready to help you.