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How Are Small Business Grants Different from Loans?


Do you own a small business? Are you planning to expand your business? Here, small business grants can help you. How are they different from business loans?

You might have come across ads claiming that you can get small business grants for free from the government. After coming across this claim, you might have wondered what are grants. How are they different from business loans? Are they better than loans and are they offered free of cost?

The thing to remember here is that both business grants and loans can provide you with the required capital. Not only for you as a business owner but also grants and loans are provided to other businesses.

However, small business grants are better than loans in many ways. The reason is that they carry many advantages as compared to loans. For instance, you need not have to repay a grant but you will have to repay a business loan. Interesting, isn’t it? Read on to understand the difference between a grant and a loan.

What are Grants?

Before you understand how are small business grants different from small business loans, you should first know what are grants. The reason is that you might already be aware of a business loan. Even, you might have got one earlier as well.

Small business grants are financial aids provided to small businesses for particular purposes. Grants need not have to be repaid. However, to avail of a grant, you will have to meet certain criteria like financial need, the alignment of your business with the objectives of the grantor and merit.

You can get small business grants from different sources like private foundations, non-profit organizations and government agencies. You can use these funds for education, community development, research and other noble causes.

How Are Small Business Grants Different from Business Loans?

You can understand how small business grants are different from loans from the table below with ease:

S. No. Point of Comparison Small Business Grants Business Loans
1. Paying back Grants are free money and you need not have to repay Business loans are borrowed money and you will have to repay them
2. Access Hard to get as every business wishes to get free money Easy to get as compared to grants
3. Use You can use the grants only for the specific purpose that you specified when applying for the grant You can use a business loan for any purpose. You get the flexibility to use the borrowed money
4. Paperwork To qualify for small business grants you might be required to fill out forms. In some cases, you might be required to sign a proposal. Nowadays, you can apply for a business loan online with ease without much paperwork involved.


In short, even though it is hard to get small business grants in 2023 are more beneficial than loans in many ways.

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