Loans and Grants

Loans and grants for your small business

December 12th, 2010 BY Claire Moore

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As a rule I advise those who are starting a service business to avoid accumulating debt. The benefit of financing your business by yourself is that you will not only not owe anyone, you will have more freedom to decide how you will grow your business. When you have the burden of paying back debt, you options are limited. This is especially true if you get money from investors. Even your friends and family may decide to put in their “two cents” after helping to finance your start up.

The nice thing about a service business is that you have much less overhead than say, a retail business. If you’re a consultant, a bookkeeper, virtual assistant, or any of a number of businesses that allow you to work from home, then you can avoid the cost of renting a commercial location. Even a service such as hair care and travel can be operated for less than most businesses because you require minimal space and inventory.

Still, if you find that you need money to help you start and grow, here are some ideas and information to get you started.

You have probably heard of the Small Business Administration (SBA), a government agency that provides information, training, and financing for small businesses. In addition to the SBA are state and local economic development agencies and nonprofit organizations that can provide low-interest loans to small business owners. You may qualify for these loans even if you weren’t able to qualify for more traditional commercial loans through your bank.

Generally all loan programs require the same kind of information. If you want to explore loan opportunities then start assembling the information you’ll need so that you can make a good impression and simplify the whole process.

If someone wanted you to lend them money what would you want to know? You would probably want to know why they wanted the money, how they were going to use it, if they had any other debts that they were responsible for, and who was going to be managing this money. Well, any agency that lends you money will want to know the same information.

Consider your answers to the following questions:
• Why do you want the loan?
• How will the loan proceeds be used?
• What are you going to buy with the loan proceeds?
• Who is selling you the items that you will buy?
• What other debts do you owe?
• To whom do you owe these debts?
• Who is going to be managing the loan proceeds?

Other information you’ll be asked to provide will be:
• Background information such as education, criminal record, previous addresses and other names you’ve used.
• A resume detailing your work experience especially anything relating to management and business experience.
• A business plan that entails projections of your financial statement, a market plan, and an analysis of your market and your competition.
• Your credit report
• Income tax returns for the past three years
• Personal financial statements from all owners of your business.
• Bank statements may also be required.
• If you’ve been in operation for a while, you may be asked for a listing of your outstanding Accounts Receivable and Accounts Payable.
• Business license
• Articles of incorporation if applicable
• Copies of contracts you have with third parties (such as contracts to provide services)
• Franchise agreement if applicable
• Commercial leases


A grant is an award that need not be repaid. Several government agencies offer grants for specific projects. You can research available grants at to learn more. What you’ll find though is that these grants are usually for public and private nonprofit corporations such as States, counties, cities, townships, and incorporated towns and villages and so forth. They are not meant for small businesses owned by individuals.

The U.S. government refers individuals to the SBA for financial assistance in starting their businesses. The SBA may award grants to companies that meet their size standards. The most common size standard includes from 100 to 500 employees depending on the industry, and from $6 million to $28.5 million.

To search for grants for individuals you can go to where you will also find a link to the Search Tips Guide.

Some states offer grants for specific purposes such as expanding child care centers and creating energy efficient technology. These grants are not entirely free however. The recipients are often required to put up matching funds.

My advice is to save your energy. It’s extremely doubtful that you’ll find a legitimate government grant that does not have to be repaid. You will accomplish more if you just concentrate on creating your business plan.

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