Small Business: Loans and Grant & Financing FAQ's

Financing FAQs 

Starting a business can be daunting, as you wonder how do you put yourself in the best position to succeed. The answer is simple: you begin with solid information. Check out some of the frequently asked questions below to get yourself off to a solid start. 

Can I use a grant to start my business?

Generally, no – despite what you may have heard, it is rare that a for-profit business would receive grant money to start or expand a business. 

While there are a few grants available to small businesses, they are largely directed towards accomplishing specific priorities identified by the federal government or a state government agency.  For example, some states provide grants for expanding child care centers; creating energy efficient technology; and developing marketing campaigns for tourism. These grants are not necessarily free money, and usually require the recipient to match funds or combine the grant with other forms of financing such as a loan.  

How can I find a legitimate loan or grant?

There’s a sea of misinformation about business loans and grants on the Internet. Use Business.gov’s Loans and Grants Search Tool as the starting point for finding legitimate financing programs your small business might be eligible for. Keep in mind, for-profit businesses are rarely given government grants and should look to low-interest loans or venture capital financing if you’re wanting to start or expand a business. 

Grants.gov is also helpful for finding thousands of federal government grant programs, or the Catalog of Federal Domestic Assistance, which offers a comprehensive database of grants, loans and other assistance programs available from federal agencies.

I have bad credit - can I still get a small business loan?

With the state of the economy and lines of credit being significantly scaled back or eliminated altogether, loans have become increasingly hard to obtain - especially if you have poor credit. Luckily, the government has designed federal and state loan guarantee programs for people unable to obtain financing through traditional lending channels.  In many of these programs, the loan proceeds can be used for most business purposes including working capital, machinery and equipment, land and buildings, leasehold improvements, and debt refinancing. Before you apply for a loan, you should pull together the basic documentation you will for your application.

What happens if I default on my loan? 

While it’s not the end of the world, defaulting on your loan will definitely have some immediate effects like a drop in your credit score, increased interest rates, and foreclosure of property - and it will definitely make it more difficult to find another loan (should you need to in the future). 

If you are about to default on a loan, you may want to consider some of the tips offered in the Loans and Grants Community, like negotiating new terms with your lender, considering government debt relief options, or liquidating some of your business assets. Also, if your business will make it or break it depending on a loan then you may want to try looking into other methods of funding your business. 

Source: http://community2.business.gov/t5/Small-Business-Cents/Loans-and-Grant-amp-Financing-FAQ-s/ba-p/38620?cm_mmc=GovDelivery-_-101310-_-weekly-_-community