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Business Grants: 9 Places to Find and Get Free Money

May 18, 2022

By: Sharita M. Humphrey

A business grant is a certain amount of money you can obtain to help with your business, similar to a loan with the key difference being that you don’t have to pay anything back. Business grants are hard to obtain since they target specific business types and specific industries like technology and medical industries.

You also need to follow the rules on how to spend the money you obtain which you’ll know when you receive a grant from an organization.

But you shouldn’t get disheartened by these facts, as there are always ways to get a grant for your business. 

Here they are:

    1. Grants.gov

      Established in 2002, Grants.gov is an E-government initiative operated under the Office of Management and Budget providing a centralized location for those seeking a grant for their business. Having information on over 1000 grant programs, Grants.gov is definitely one of the first places you should check out, as they also provide you with most of the knowledge you need to know about how grants work, how you could be eligible for a grant, terminologies, and how grant frauds work. Easily accessible, beginner-friendly, and holding tons of information on grants, Grants.gov tops our list of places you could find grants for your business.

    2. seedfund.nsf.gov

      If your business is based on science, engineering, and technology, a seed fund is where you should be looking into. With up to $2M / 36+ months to be received from seed funds, your business should be headed to the path you envisioned since the beginning. And since they provide you with monthly reports of your progress and financials, all you have to focus on is creating your product or service. One big thing about them is that you don’t have to relocate anywhere to access their funds, since they support startups in all locations. Their website also has all the information you need on whether you are eligible to receive their rewards or not.

    3. sba.gov

      With multiple grant programs including Covid-19 relief grant programs, sba.gov is another place to look into when you’re looking to get a grant for your business.

      SBA also offers grants to community organizations that are promoting entrepreneurship, including veteran-owned, and service-disabled veteran-owned businesses. Although they do not provide grants for expanding your business or starting your business, you may find grants that provide everything you’ve needed.

    4. The SBIR and STTR Programs

      The SBIR and STTR programs are geared towards funding small businesses engaging in federal research and development. Both programs require research partnerships, with STTR requiring you to collaborate with a non-profit research institution while you are under the first 2 phases of their program.

    5. Corporate Grants Program – Patagonia

      The Patagonia grant program differs a lot from the others on our list, with their grant specializing in environmental programs and projects. They have a local grant program, and also an international grant program if you are not based in the United States or Canada. If your small business or organization fits their criteria, you should definitely check Patagonia out.

    6. Nav’s Small Business Grant

      Nav’s quarterly $10,000 small business grant is another unique one, as your company can be about anything since they support any business. You just have to apply for their quarterly contest, write a post on your business socials, and share your posts around encouraging all your friends to vote for your business. If you win, you get the $10,000 grant, but even second place gets to have a $5,000 grant! You got nothing to lose trying to win Nav’s quarterly business grant

    7. The Amber Grant

      Another unique grant as this applies only to businesses owned by women and supports any type of business. Applying for the grant is no sweat too, as they don’t require you to fill out forms, and all you have to do is talk about yourself, and how you want your business dreams to come to life.

    8. NASE Growth Grants

      Members of the National Association of the Self-Employed (NASE) can apply for the NASE grant program. Though not all the applicants can be accepted, it is definitely worth the shot if you are a member of the NASE.

    9. Fastbreak for Small Businesses

      For small businesses that are lacking some exposure and love, this is a good choice to try and get a business grant, as LegalZoom, the NBA, WNBA, and NBA G League have all teamed up to help small businesses owners in underserved and underrepresented communities. With up to $10,000 grants, and open twice a year, this is definitely something to check out if you are in one of the smaller and ignored business communities.

Conclusion

Business grants are everywhere from online, local networks, and the government. If you are struggling with your business, don’t forget that there is always a way to get some help. There are countless opportunities awaiting you, and we hope this list of business grants could help your business grow and become the dream you’ve always wanted.

sharita
About the Author: Sharita M. Humphrey is an award-winning finance expert, money mentor and Certified Financial Education Instructor. Once broke and homeless, Sharita completely transformed her life and is now a successful entrepreneur and one of the most in-demand money coaches for individuals and business owners of color. In 2020, Sharita was named National Financial Educator of the Year.

How Your Business Type May Affect Your Loan Application

May 17, 2022

By: Matthew Gillman, SMB Compass Founder

Small business owners don’t always get approved for financing for various reasons. Some companies may have an easier time getting approved than others, even though they all met the minimum loan application requirements.

If you’ve recently been denied a loan, one of the factors affecting your lender’s decision is your business type. This article will explore how this affected your loan application, which types of businesses are risky for lenders, and what you can do to secure funding.

Why does your business type matter to lenders?

Lenders will take a holistic look at your credentials and submitted requirements before approving your loan. Some of the essential things they put into consideration are your personal and business credit scores, time in business, location of business operations, and your comprehensive business plan. This also includes your business type and your industry.

In general, new businesses and startups are frowned upon by traditional lenders like banks and credit unions for economic reasons. Many economists and policymakers have long explained that smaller companies have a harder time obtaining financing than their larger counterparts due to lack of collateral, poor credit history, insurmountable debts, and so on.

There are about 32 million small businesses in the United States. In a Federal Reserve data, it was revealed that 30% of small business loan applications were denied, and 26% only qualified for a portion of the funds they initially requested. Some 63% of loan applicants did not apply for financing for fear of being denied a loan.

On top of business size, lenders also factor in your business industry. During the pandemic, many businesses have been gravely affected by lockdown implementations and operational restrictions; however, this experience is quite uneven. Industries like travel, accommodations, food services, transportation, and educational services felt the repercussions of these measures, leading many of them to shut down permanently.

For this reason, lenders become wary of lending to small businesses in these industries. With economic instability, lending to these companies is not only riskier; it is also more expensive. Most traditional lenders wouldn’t take the chance to loan you money, knowing that your business might fold before you’re able to repay them.

There is the uncertainty of whether SMEs could cope with shifting market changes. Despite that, there are ways you can secure funding regardless of how big or small your company is, or what type of business you’re running.

Is your business type affecting your loan application? Here’s what to do

Your business type and industry are just one of the factors lenders will use to determine if you are eligible to get a loan. There are other things you can show to prove your creditworthiness. Here are some of the most effective ways.

    1. Show a high credit rating
      Your credit score is a summary of your credit history, which tells whether you have been paying off your bills and debts on time. When your credit score is high, it shows that you are on top of your payables. A low score indicates that you are a risky borrower.

      The Fair Isaac Corporation (FICO) determines your credit score (also called FICO score), which is a three-digit number that summarizes your credit report. To secure a small business loan, your credit score must be at least 600.

      There are five elements involved in getting a high FICO score, which is your payment history (35%), total debts incurred (30%), length of credit history (15%), credit mix, or the diversity of credit types you’ve had over time (10%), and new credit applications (10%).

      Knowing these five elements can be helpful, especially if you’re trying to increase your credit score.

    2. Maintain a positive cash flow
      Showing a positive cash flow is essential for small businesses, especially when applying for a loan. Lenders want to see that your company is healthy and generating cash flow so that they know you will be able to repay the loan on time. A positive cash flow means that a company has more cash coming in than going out.

      There are many ways to boost your cash flow. For example, market your products and services more effectively or offer discounts to attract new customers. On top of that, you can cut back on unnecessary costs by finding cheaper suppliers or outsourcing some of your work.

    3. Provide collateral
      Considering that most small businesses are risky in the eyes of lenders, you need to put up collateral to minimize that risk, especially if you’re applying for a small business loan from traditional lenders.

      Collateral is important for lenders because it provides them with some assurance that they will be able to recover at least a portion of their investment if the borrower defaults on the loan. For small businesses, collateral can also help them secure a loan by increasing the lender’s confidence in their ability to repay the debt.

      Your collateral could be anything from your home or vehicle to your inventory or equipment. Just remember that if you’re unable to repay your loan, lenders have the right to seize the collateral.

    4. Explore other financing options
      Lastly, try exploring alternative financing for your business. As a small business owner, you have a myriad of options to gain capital from alternative lenders who may be a better fit for your needs.

      Working with alternative lenders to secure more cash for your business is a great option, especially if you don’t have the best credentials to get a loan from banks.

      Some lenders are lenient when it comes to your credit score or business type. As long as you can prove your ability to pay on time, your chances of getting approved for any small business financing will increase.

Matthew-Gillman
About the Author: Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.

7 Reasons You May Have Been Denied Business Financing

April 18, 2022

By: Matthew Gillman

Getting your business loan application denied can be discouraging and frustrating, especially if you’ve been looking forward to that additional cash injection. However, if you’ve been in the business long enough, you know that it happens to many small business owners.

Lenders reject loan applications for several reasons, and knowing what those reasons are can do a lot in improving your chance of approval in the future. We’ve outlined seven possible issues that might lead to business financing denial, along with some quick fixes to each problem.

 

These are the 7 Reasons You May Have Been Denied Business Financing Click To Tweet

1. Poor Credit History

Poor credit scores or lack of credit history are among the most common reasons businesses get rejected for business financing. Credit scores help banks and other lenders determine your creditworthiness – or how likely you (or your business) are to pay them back. Generally, poor credit scores (below 650) raise a red flag to lenders and may result in outright business loan rejection.

A lot of factors come into the determination of your credit score. For instance, a recent bankruptcy could significantly bring your score down. The same goes for late payments and loan defaults. These will give the lenders the impression that you cannot handle your finances properly, which negatively affects your image as a borrower.

If a poor credit score is the main reason your loan application was rejected, here are a few things you can do to fix it.

  • Pay your debt obligations on or before the deadline
  • Work with suppliers or lenders that report to the major credit bureaus
  • Check your credit report regularly and report mistakes to the credit bureau ASAP

Some lenders may also offer financing options to businesses with poor credit scores. The downside is they may charge a higher interest rate to mitigate the risk.

2. Poor Cash Flow

If you’re applying for a loan, it’s also important to consider your business’ cash flow on top of your credit scores. Suppose there are gaps in this area or your company often experiences periods where revenue doesn’t match expenses (and debt repayments). In that case, lenders may reject applications based on that irregularity alone.

Lenders know that many small businesses fail because of poor cash flow management. With that, it’s crucial to monitor your business’ cash inflow and outflow. Make sure that there’s more coming in than out (at least for most of the year). Sometimes, late-paying customers can affect your cash flow, so make sure to adopt a more efficient process of payment collection (e.g., investing in robust accounting software).

3. High (or Too Low) Credit Utilization

Your credit utilization rate simply refers to the percentage of credit you used compared to the credit available to you. With a high credit utilization rate, lenders will assume that there won’t be enough cash to cover the additional financial obligation. On the other hand, too little credit utilization may demonstrate your poor experience in debt management, which also raises a red flag to small business lenders.

Businesses looking to apply for business financing should aim for a credit utilization rate of no more than 30%. That means if you have a credit limit of $100,000, you must keep your credit card balances below $30,000.

If you have a high credit utilization rate, one of the things you can do is pay down some of your existing debts, like credit cards. It’s also important to note that closing credit card accounts can decrease the amount of credit available to you, thus, increasing your credit utilization rate. That said, even if you’ve paid your credit card debt in full, keep the account open as much as possible.

4. Lack of Collateral

Lenders, especially banks, may require small businesses to pledge collateral to guarantee the loan. It could be commercial real estate, equipment, or other valuable business properties. Unfortunately, most small businesses may not have enough assets on their balance sheets to support the application. As a result, they often get turned down for business loans. Even if you have some assets, if the lender doesn’t view it as valuable enough, it will be harder to qualify for a business loan from banks.

If you’re faced with this situation, consider other forms of financing. For instance, invoice financing lets you use your customers’ outstanding invoices to advance capital. Other lenders may also offer unsecured business lines of credit to small business owners that don’t have enough assets. You can utilize these forms of financing until you have enough collateral to secure a more comprehensive business loan.

5. Short Business History

Lenders generally require businesses to have at least two years of business history before approving business loan applications. That is because such companies typically haven’t established enough credit or profitability history, making it harder for lenders to gauge their ability to repay the loan.

Startups commonly get rejected for business financing because of their lack of business history. Fortunately, they have more options now than ever. Alternative lenders may offer startup loans to companies that are less than a year old. The only downside is you might have to pay a higher interest rate. Nevertheless, it’s a viable option to consider if your business needs additional financing but you haven’t been in business long enough to qualify for larger loans.

6. Risky Industry

Traditional lenders may consider some industries riskier than others. For instance, service-based businesses like restaurants and construction are considered high-risk because of seasonality and high failure rates. Gambling or CBD businesses may find it challenging to secure financing from traditional banks considering the ever-changing regulations regarding their operations.

That is not to say that such businesses cannot acquire business financing. If your business is high-risk, you can seek funding from lenders specializing in lending to businesses in your industry. Not only will you increase your chances of approval, but you might even get better financing terms.

7. Lack of Documents

No matter how stellar your credit history or revenue is, you’ll most likely be rejected for business financing if you don’t submit the required documents. These documents serve as proof of your creditworthiness, convincing lenders that your loan application is worth approving. If you lack the necessary documents, lenders will have no way of confirming your credibility.

The next time you apply, be sure to have a checklist of what the lenders need. Aside from the primary documents like business leases, registrations, identification, bank statements, and tax returns, you’ll also need to prepare additional documents like:

  • Credit reports
  • Balance sheets
  • Profit and loss statements
  • Cash flow projections
  • Articles of incorporation
  • Business contracts

If you’re not sure what documents to prepare, it’s best to give the lenders a call and ask them what they usually require.

Bottom Line

Applying for business financing is not for the faint of heart. Rejections can happen, and they can be frustrating. However, by understanding the most common reasons for business financing rejection, you can fix them and improve your chances of approval in the future.

About the Author

Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.

Checklist on Better Understanding Your Business Credit Reports

March 14, 2022

Author: Sharita M. Humphrey

A company’s capacity to buy something now and pay for it later is referred to as business credit. You may make it easier to borrow money when your firm needs it by obtaining a solid business credit report. It is a document that contains a picture of a company’s financial credit health.

 

It will include.

  • Company’s financial background
  • Payment history on tradelines
  • Current credit inquiry history
  • Any legal filings, such as judgments, collections, and bankruptcies

While each credit bureau’s report will differ slightly in appearance, they will all contain the same information. As you proceed through the process of securing a small business loan, it’s a good idea to buy a credit report and understand it. Any business credit report you buy should include the following items.

  1. Financial History Section

The Financial History Section is composed of commercial banking, insurance, and leasing data. Your payment history with creditors, lenders, and insurance are shown in this section.

It displays information such as:

  • The date the tradeline was opened
  • The terms
  • The original and current balances
  • Any account delinquencies
  • Business loans
  • Insurance policies
  • Lines of credit
  • Equipment leases
  1. Collections Filings Section

Any legal filings, bankruptcies, or collection reports that your company has filed are in this area. Tax liens, judgments, and accounts that have been in collections for 90 days will be included here.

It includes details such as:

  • Open and Close dates of your collection filings
  • Agencies and their contact details
  • The status of your collection
  • Amount disputed
  • Amount collected

Lenders are less likely to give loans to you if you have a lot of court filings on your background.

  1. Tradeline Experiences Section

The Tradeline Experience Section shows the tradeline payment history of your business. Displayed in the tradeline payment history section is your company’s payment history over the last three years. Payments to vendors are frequently included in this section.

In addition, here are some details included in this section:

  • The time your business was first initially reported to the credit bureau
  • Payment terms
  • Recent high credit line
  • Maximum credit line
  • Monthly payment, whether it’s current or past due

It will also tell you how many times you’ve passed due on a tradeline for 30 days or more.

  1. Business Profile Section

The business profile or company information section is the first thing that appears on a small business credit report. The legal name, address, and data about the company’s incorporation are shown in this section.

It also includes other business data such as:

  • Ownership subsidiary information
  • The number of employees
  • Type of business
  • Years in business
  • SIC code (Standard Industrial Classification)
  • NAISC code (North American Industry Classification System)
  1. Business Credit Score Section

A credit score will be included in a company credit report, just as it is in a personal credit report. Each credit reporting bureau has its own credit scoring range. They should all produce an easily understandable number.

A business credit report states some business information such as:

  • Your company’s degree of credit risk
  • The reasons that went into calculating your credit score
  • A prognosis of your company’s future credit risk based on your report

Credit reports and scores for businesses are indicators of a company’s financial soundness. Business owners’ primary goal should be to develop a track record of regular payments on all their financial obligations. It is a must to build a strong business credit report and score.

Here are some common factors that could affect your business credit score:

  • How much credit do you have
  • How long you’ve had credit
  • How many late dues do you have on your credit report

You can try to buy a business credit report to help you maintain track of your company’s credit health. It is regardless of which credit reporting agency you choose.

Business Credit Reporting Agencies

There are many business credit reporting agencies you can trust. In most cases, all company credit reports contain the same information. They have common key data components even when they have a unique process for validating and collecting data.

The following are some of the most well-known business credit reporting organizations.

Dun & Bradstreet

It is the credit report that is most widely used. D&B assigns credit ratings to businesses based on many indices that represent their current and future financial risk.

Experian

To calculate its score, it gathers business data, payment and collection history, and financial data. The Credit Ranking Intelliscore from Experian goes from 1 to 100, with 100 being the highest attainable score.

The FICO® SBSS

It is most commonly used for SBA (Small Business Administration) financing. To generate a credit score, it gathers information from all three credit bureaus.

Conclusion

The more efforts you take to establish business credit, the more financial prospects your company will have. Banks, lenders, and suppliers use business credit reports to determine a company’s creditworthiness. So, make every effort to control your debt and keep on top of payments.

You can start to make paying bills on time a priority. Resort to make a budget, cut back on certain purchases, or set up payment reminders. Any late dues will have a negative impact on your company’s score. And it will make it harder to attract lenders, partners, or investors in the future.

Don’t hesitate to seek professional help from a financial counselor. It helps in times when your company does find itself in debt.

About the Author: Sharita M. Humphrey is an award-winning finance expert, money mentor and Certified Financial Education Instructor. Once broke and homeless, Sharita completely transformed her life and is now a successful entrepreneur and one of the most in-demand money coaches for individuals and business owners of color. In 2020, Sharita was named National Financial Educator of the Year.

4 Important Documents You Need When Applying for a Business Loan

March 8, 2022

Getting a small business loan is a daunting task for many company owners, simply because it can be time-consuming to gather all the documents needed to apply. If you’re looking to secure any type of financing to increase capital, having a checklist of the most common requirements will go a long way in expediting the application process.

Before diving right in, take note that lenders consider a number of factors when requesting documents. The requirements may vary based on time in business, your industry, credit score, and the type of loan you’re trying to get.

For example, applying for a business line of credit won’t necessarily require you to have a good credit score, although having solid financials will mean you’ll get lower interest rates.

On top of that, traditional lenders like banks and credit unions are stricter when approving loan applications and may require more documents to prove your creditworthiness. Alternative lenders, on the other hand, are much more lenient.

 

 

The business loan documents listed below are the most common requirements borrowers must submit to the lender they will be working with. If any of these documents are not submitted (or for some reason the information you provided is incorrect), your application may be at a higher risk of getting rejected.

Business Loan Application Requirements

  1.  Income tax returns

    Lenders require your most recent Income Tax Return (ITR) because it illustrates how well your business performed in the previous year. It verifies your income, and uses the information on your ITR to determine the amount of money they could loan you.
    Also, your ITR shows your debt-to-income ratio, which is the percentage of your monthly gross income used for paying off debts. If your debt-to-income ratio is high, lenders might consider you a high-risk borrower.
    To give you an idea, your debt-to-income ratio must be below 43%. You can calculate yours by dividing your monthly debt by your gross income. For example, if your monthly debt is $15,000 and your gross income is $55,000, your debt-to-income ratio is 27% ($15,000 / $55,000).

  2. Financial statements

    Financial statements are a critical barometer of your business’ success. They give lenders an overview of your organization’s financial position and cash flow.
    Like your ITR, financial statements are used by lenders to determine if your business is keeping up with expenses, what your income sources are, and whether you are generating enough money to take on another debt.
    There are three key financial statements you need to prepare beforehand: your balance sheet, profit and loss statement (or your income statement), and cash flow statement.

    • Balance sheet – gives you a general overview of your assets, liabilities, and stockholders’ equity
    • Profit and loss statement – gives you an overview of your company’s revenues and expenses. Your P&L statement will also show your net income at a certain period of time.
    • Cash flow statement – shows the inflow and outflow of cash in your business. This demonstrates whether the company is making enough money to pay its creditors, has enough cash reserves, and how much goes to operational expenses.
      Lenders use all these financial statements to evaluate your business’ financial health, as well as income potential. It is also used to check which assets may be used as collateral when applying for a business loan.
  3. Proof of business registration

    To prove your business’ legitimacy, you need to provide legal documents such as business registration, licenses, permits, articles of incorporation, copies of contracts with third parties, franchise agreements, and other documents that prove you are operating your business in good faith.
    In some instances, borrowers show their commercial lease agreements, payroll documentation, and certificate of good standing. This certificate indicates that the company is up-to-date with state-required filings and taxes, giving lenders a better idea of where your business stands.

  4. Good personal and business credit

    When applying for small business loans, you need to know both your personal and business credit scores. You can obtain copies of your credit reports from TransUnion, Experian or Equifax so you have an idea of your credit standing.
    To give you an idea, personal credit scores range anywhere between 350 to 850; meanwhile, business credit scores are any number below 100. For banks and alternative lenders to trust you, you must have a personal credit score of at least 580. This score shows lenders that you are a good payer.
    Here’s an instance: if you are applying for an SBA 7(a) loan, the minimum credit score requirement is 650. If you’re getting an SBA microloan, the minimum credit score is 620, plus collateral. For short-term loans, you may need a minimum of 540. Note that this will all depend on your qualifications, so you need to speak with a finance expert to discuss your options.
    If you’re having trouble on this front and think that your credit score isn’t in good shape, you may want to explore financing options from lenders who aren’t strict. No credit check business loans include a business line of credit, invoice factoring, and equipment financing, although you have to put up collateral to minimize the lender’s risks.

Don’t be afraid to ask

Understanding the ins and outs of business financing takes a lot of work. With so many options to choose from, you need to consult a finance expert to know the best funding for your business.

As for the documents, once you’ve prepared these requirements beforehand, you won’t have a problem during the application process. Provide accurate and legitimate information to your lender to secure a loan in no time.

ABOUT THE AUTHOR

Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.