Grants or Loans to Start a Small Business
The two basic approaches for funding small business are securing private loans through lenders like banks and applying for government, state or nonprofit grants. While many grants are specifically geared toward certain businesses---for example, many grants aid minority-owned businesses---there are a few strategies that apply to any new venture.
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Basic 7(a)
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The Basic 7(a) Loan Program is the most commonly used small business loan type. It is used for starting, purchasing and expanding a small business. The program originates from section 7(a) of the Small Business Act. Loans can only be obtained through participating bank and non-bank lenders. Borrowers are required to meet the lender's qualifications for loan approval. Basic lender and agency requirements include repayment ability, good character, management capability, collateral and owner's equity contribution.
Microloans
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Microloans are small loans that are especially designed for starting new or expanding existing small businesses. The Small Business Association has a microlending program. The maximum loan amount is $35,000 and applications are taken through local intermediary lenders. Each lender has its own lending and credit requirements and generally require loan collateral or personal guarantee of repayment. Micro-lenders are available in 46 of the 50 states plus the District of Columbia and Puerto Rico. The excluded states are Alaska, Rhode Island, Utah and West Virginia.
Some nonprofit organizations, like Kiva (www.kiva.org) or Grameen America (www.grameenamerica.com), have microfinance programs in which small business owners can request small loans (usually up to $10,000), which are then funded by donors. These loans must be repaid, but the terms of repayment and the application process in general are less rigorous than those attached to standard bank loans.
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Self-Help Program
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The Self-Help program provides financing for small businesses and non-profit organizations around the country. The program's mission is to lend to businesses that strive to improve their communities. The program lends to small businesses to start, purchase, and expand their operations. The program also finances the purchase of equipment, machinery, building and construction materials, inventory and working capital.
Entrepreneurial Grants
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The Idea Café provides ideas on starting, managing and expanding your business. In addition, the Idea Café's Small Business Grant program provides $1,000 awards to deserving small business owners with superb ideas. The grant application must be completed on the Idea Café website. Grant winners are required to provide brief updates of their accomplishments, lessons learned, problems encountered and upcoming business goals for the first six months after award receipt.
IdeaBlob is a similar concept wherein budding entrepreneurs submit their best ideas online for the chance to win a $10,000 grant towards starting a business.
Arts Grants
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The National Endowment for the Arts, an independent federally funded agency, provides many grant opportunities for small businesses related to the arts. These grants are directed towards disciplines such as art education, dance, design, museums, and theater ventures. Applications for these grants must be completed through the Grants.gov website. Registration is required. Be advised: registration or the Grants.gov website can take up to 6 weeks to complete.
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