In 2020, 81% of small US businesses reported financial hardship due to the COVID-19 pandemic. Chances are, your business may still be experiencing challenges.
To alleviate this economic crisis, the U.S. administration has rolled out a new stimulus plan that provides financial relief to small businesses. This plan includes small business grants that can alleviate your business’s burden.
While no one is sure when everything will “return to normal”, small businesses can use this plan to keep business running as usual. Entrepreneurs and businesses faced unprecedented hardships in 2020, but this new relief plan can lighten their financial burdens.
By reading this guide, you will learn what this new COVID relief plan is and how your business can benefit from it.
Overview of the Relief Plan
The administration’s COVID relief plan will reduce economic distress in two parts.
The first part, called the American Rescue Plan, continues relief efforts implemented in 2020. This $1.9 trillion plan will bolster funding for individuals and households, unemployment benefits, vaccine distribution, school reopenings, small businesses, and more.
The second part will focus on the nation’s long-term recovery. This process will concentrate on clean energy, infrastructure, healthcare, education, and more.
Small businesses will be provided $15 billion in grants. They will also be issued another $35 billion in loans.
What a Grant Is
A grant is a form of funding that does not require repayment. It can be given to nearly any sort of entity, whether that be an individual, corporation, or a business. These grants can be given by other corporations, foundations, businesses, and government agencies. Different grants have different conditions on how their money should be used.
Grants aimed towards small businesses can be further specified by varying factors such as minority ownership, conservation effort, veteran-based focus, etc. These specifications allow certain grants to be less competitive and more available.
Grants vs. Loans
Small businesses are getting $15 billion in grants and $35 billion in loans. So wouldn’t it make more sense to apply for a loan instead?
It depends. Both grants and loans can aid small businesses, and they each have their own set of benefits. Here are a few ways grants and loans vary from each other:
Repayment
The main difference between grants and loans is that loans need to be repaid. If you’re considering taking out a loan, know that you must pay it all back. You could even consult with a community bank to view what loan options are best for your financial circumstances.
Interest
Most loans need to be repaid with interest. But paying interest doesn’t have to be intimidating.
Not all interest rates are the same so certain types of interest rates could benefit you more than others. On the other hand, grants do not have interest rates because they do not need to be repaid at all.
Obtainability
Loans are easier to obtain because of their comparably higher funding, which is due to expected repayment. If you cannot obtain a grant, loans are a great option.
Taxability
Loans have a striking benefit — they’re better for taxes. Since they’re not substituting your revenue as grants would, you won’t be taxed for the principal amount. On the other hand, your interest payments may be tax-deductible. As long as you’re able to pay your interest fees, a tax advisor can determine if you can write them off your taxes.
To learn more about small business loans, check out our post dedicated to explaining your loan options.
Federal Small Business Grants
The federal government has always offered small business grants. The refinancing of these grants allows more businesses to obtain them. But COVID has not made the process any less competitive, and will likely actually make them even more competitive. Make sure you understand exactly what grants ask for from applicants so you can put your business’s best foot forward.
General Eligibility
To qualify for a federal small business grant, your business must abide by the size standards set by the US Small Business Administration (SBA). This is determined by their official table of size standards. There are various factors that make up these standards, including the number of your business’s employees and your business’s annual receipts.
SBA’s official site delves much deeper into their size standard requirements.
Where to Find These Grants
There are numerous available federal business grants available on Grants.gov, the federal government’s official grants site. Once you register, you’ll be able to browse through more than 1,000 grant programs.
Some of these grants are categorically broader and more competitive, but you will most likely be able to find a grant program that can uniquely serve your business. When you’re finally ready to apply for a federal grant, make an account with Grants.gov and register for an application.
How to Apply for Them
When filling out a grant application, prove that you’re serious about your business and understand how to run it. Take this application seriously since many other passionate business owners will do their best to obtain this grant.
Detail your business’s mission, structure, and services/products. Explaining your business plan in detail will demonstrate your intimate business prowess.
If applying for a niche grant, emphasize aspects of your business that are relevant to that niche. For example, if applying for an environment-focused grant, center your application around how your business can solve environmental concerns. If applying for a minority-targeted grant, explain how your experiences as a minority have shaped your business.
Securing Funding for Your Small Business
COVID has been financially devastating, and when you’re a small business owner, the stakes of economic failure are high. With this guide, you’re much more equipped to look into grants that will relieve your business’s financial struggles. The new COVID relief plan is meant to help you, but it can only do that if you understand how to help yourself.
Now that you’ve now got a good idea of how small business grants can help you, let us take you to the next step. Contact us for expert financial consultation, and browse the rest of our blog for more information that can help your business.
