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There was a time when the concept of free money was a very American notion. But, as the economy has tightened and budgets decreased, there are very few avenues towards capital to start up a new business that do not involve loans and interest. This makes the path towards financial independence all but impossible for many working Americans. However, the small business grant is still available (even in these very lean times!) as a potential source of funding for you dream of self-employment.
A small business grant is part of a program funded by the federal government which provides capital for start up businesses. Sometimes a small business grant will simply give the money to a recipient with no requirement of repayment. Other business grants will require you to repay them with a minimal amount of interest over a period of years. Whether or not a small business grant requires repayment will depend on the nature of the grant itself.
Obtaining a small business grant is certainly no simple matter. In truth, over a million applications are received every year with only hundreds being awarded. However, the fact that only a few hundred are awarded does not necessarily mean that the others were turned down for lack of funding. Quite the opposite, it is very common for a small business grant to be turned down due to filing mistakes as opposed to lack of funds. In fact, it is a common occurrence for funds to be returned at the end of the year because not enough people qualified for the grants available.
But, the government is not the only potential source of a small business grant. Businesses will frequently form a “private foundation” which is responsible for disbursing funds set aside for grants and other useful community needs. The incentive for a company to use a private foundation is simple: tax savings. A company will pay less in corporate taxes when it gives away a small business grant than if it merely reported the income. Therefore, the private business community is an excellent grant source and is expected to be so in the future unless the tax code is significantly altered.
The best way to ensure that your small business grant is approved is to be organized and very thorough in filling out the application. A winning small business grant will generally include a business plan that includes a detailed explanation of what funds are needed and why. But the most important thing to remember is to fill out the application thoroughly and exactly as directed. Attention to detail is what will separate the winners of a small business grant from the losers.
Small business is categorized by its small capital, productivity, manpower and profit. Some of the small business start ups are self financed. But most of them are financed by borrowing of money. In order to prevent higher down payment of interest to banks, the Government of many countries provide the small business grant. The small business grant helps the entrepreneur to receive the principle amount without having to worry about the future repayment of it.
The small business grants help in boosting the growth of small firms since the financial aid received from is a stable and reliable source. Small business grants are mostly obtained from the national Government or from the state or local authorities. Some industrial organizations or established corporations also provide such grants but are not always desirable.
Small business grants provide limited funding. The funding is targeted in specific areas. The main area is principal amount where capital investment is very low or unavailable. Small business grants are also provided for business related to farming, fishery or husbandry. The small business grant is targeted towards funding for hiring of manpower or for purchasing of new machinery and other equipments. If a separate building is required then the small business grant is directed towards purchasing of the land and constructing of the required structure. For more established businesses, the small business grants provide financing for research and development and improvement of technology. Furthermore, small business grants are provided for small businesses with foreign exports to enhance international trade.
In order to avail the small business grant, a well drafted business plan is submitted to the Government or authority providing the grant. Usually the loan provider is the Small Business Administration. The borrower should clearly mention the areas where the grant money will be invested. It is expected that 50-85% of the grant money should be invested into the business. The small business grant is approved subjected to guarantee. Upon approval, the credit analysis is done and the final report is submitted to the business lender. The lender directly disburses the amount to the small business owner. The loan repayment is done on monthly installment basis to the business lender.
In the US, obtaining a small business grant for start up businesses is rare. It is provided only for selected category of businesses, especially those into higher technology. It is a time consuming procedure for the companies to obtain the small business grants. Hence such start up companies approach major corporations that provide the small business grants.
In UK, obtaining small business grants is relatively easier. The best source for small business grant in UK is the Princes Youth Business trust. They provide entrepreneurs aged 18-30 years with grants of £1500-£5000. For start up businesses, the trust provides £250 for marketing and research work. In order to qualify for the small business grant, the individual should prove the non availability of capital and ensure that no other organization has provided the required funding. Also the trust should be satisfied with the business plan that has been submitted by the business owner.