The Ultimate Guide to Securing Small Business Grants

As a small business owner, you may face several challenges while securing your business loan. The reasons behind these difficulties could be less time in business, a low credit score, or a high debt-to-income ratio. However, with the spirit of a growing entrepreneur, you can overcome these challenges by trying to win the trust of the lender. The best ways to win your lender’s trust are to be ready with your business plan, have the right type of employees, correct tax handling, and proper maintenance of licensing and accounts. 

However, the biggest challenge for your small business is to determine which would be the right funding option for them. The different options available are self-funding, where you can make your business debt-free, equity financing, where you will have to sell a certain stake in your business, secured business loans with collateral, and unsecured business loans. The Government of India has also come up with several options that your small business can avail yourself of.

1. MSME Local Business Loans

The lenders have come up with a scheme of accepting these loans in just 59 minutes. They offer financing up to Rs. 1 crore to small business owners. Although you get to know about the acceptance of your loan application within 59 minutes, it takes approximately 8 to 12 days to get your loan reflected in your business bank account. 

2. MUDRA Loans

These are the Government loans for small businesses that you can opt for. These are the best options for low-cost credit. If your business is in the manufacturing, trading, or service sector, you may get these loans easily. The Government considers this as the ‘paying the unfunded’ scheme. 

3. Angel Investors

These are individuals who have a lot of money and want to use that money to facilitate the growth of local businesses. Sometimes, they also offer mentoring services. They usually contribute to the expansion of the business in the seed stage. However, they expect ownership of around 30% of the equity and do not invest a huge sum of money. 

4. Venture Capitalists

They are the ones who offer a large considerable amount of money to small business owners. They are professionals with surplus funds to invest in start-ups. They also offer mentorship and expert guidance in all fields of the business. Venture capitalists keep their investments ongoing and usually exit when there is an IPO. This is why they invest in businesses that have huge potential, in their opinion.  

5. Bank Loans

Securing a loan from a bank may be a task for small business owners. This is because banks have a lot of complex procedures and require many documents. However, if you have a good credit score and your business is more than a year old, you might stand a chance. 

Dos And Don’ts While Securing Small Business Grants

• Do prepare a proper business plan with a presentation to pitch your funding request. It is not essential that all the lenders would want to see a business plan, but they definitely increase your chances of getting funding. 

• Don’t accept any funding without going through their proposal properly. There might be certain loopholes that you will not be aware of as a small business owner. So, try to get a business lawyer who will explain the entire thing to you before agreeing. 

• Do keep your finances in a settled manner. Make sure that you put up the true picture of your business and show them how organized your business is. 

• Don’t add on to your debt. If you are trying to gain funding for your start-up, it will be wrong to take up more personal or business debt for purchasing another thing. 

How To Apply for Small Business Loans?

1. Conduct Extensive Research

After deciding on the amount of funding you require for your business, start your research. Get to know about all the options available to you. After choosing your preferred option, move forward towards researching the different lenders and their schemes. 

2. Identify The Best Opportunities

Choose the best schemes for your business and then see which one would accept your proposal within a small-time frame. This may help you get funding before the anticipated time. 

3. Check Your Eligibility

Take a look at the eligibility criteria for qualifying for the loan. Different lenders have different requirements, so make sure to go through them before you apply for the loan. 

The Bottom Line It would be a good call to apply for as many business loans as possible. Then, out of all the approved applications, you can choose the best one for your business. However, keep in mind that the process of getting your loan approved is usually very lengthy, involving several documents and a few interviews as well.