Business funding—whether obtained through grants, loans, or some combination of the two—can increase your working capital and be a catalyst for growth.

Nevertheless, it’s important to understand the nuances of these two types of funding to ensure you know what to expect when applying for, obtaining, and using the funds.

Here’s the main difference: A grant is a set amount of money that is awarded to an applicant without repayment, while a loan needs to be paid back with interest.

Both types of funding can be obtained for personal or business use. Grants are more limited than loans in that there are fewer providers and fewer eligible/approved applicants. Loans are available to many people and businesses, as long as they meet the lender’s requirements.

Comparing grants and loans

Here’s a helpful table that shares some of the main differences between these two types of funding.

	Grant	Loan
The funding must be paid back		X
The applicant must meet predetermined criteria	X	X
Available funding is highly limited	X
Funding is readily available and application is easy		X
Funding can be used for various purposes		X
Applications can take months to be approved	X
Funds can be deposited into your account within days		X

When grants may be an option

People across the country and from all industries apply for grants because the funds, if awarded, do not need to be repaid. The funds are limited—high demand causes long wait times for decisioning. The application process requires significant paperwork and technical know-how. And, once funds are obtained, there may be ongoing reporting and auditing requirements.

Quick Tip: Grants are often awarded based on predetermined criteria, which are typically related to an applicant’s merit or the potential impact of their initiative. Be sure to double-check the description of the grant to ensure that you qualify.

Below are some examples of government and general small business grants:

Small Business Innovation Research Program (SBIR). This competitive grant gives small business owners the chance to take part in federal research and development with the opportunity to commercialize any innovations.
U.S. Department of Commerce Minority Business Development Agency (MBDA). MBDA awards loans and grants to minority-owned businesses throughout the year.
U.S. Small Business Administration State Trade Expansion Program (STEP). STEP provides federal funds through state agencies. These funds are designed to help small businesses export products and can be used to enter foreign markets, create a website, take part in trade shows, and more.
Power Forward Small Business Grant. Sponsored by the National Association for the Advancement of Colored People (NAACP), Vistaprint, and the Boston Celtics Shamrock Foundation, this program was developed to empower black-owned small businesses across the New England area with grants of $25,000.
National Association for the Self-Employed (NASE) Growth Grants. NASE provides lower grant amounts (up to $4,000) to assist with business growth. Since 2006, the organization has awarded over $1,000,000.

If you’re not in a rush to get funding, looking into grants is a viable option. When researching and applying for grants, be sure to investigate other financing as you’re waiting for a decision. By doing so, you’ll be prepared to shift your focus in the event you are not approved.

When a loan may be a good fit

If you need funding within a specific timeframe, a loan may be preferable. There are many lenders that provide financing quickly and easily online, including BHG Financial. You can view your payment estimate in 30 seconds and apply online in minutes.

Plus, there’s a variety of loan types available to you based on your needs. You can take out a commercial loan to boost working capital, consolidate debt, and expand your operations. BHG Financial’s commercial loans provide up to $500,000^1,2 with flexible repayment terms of up to 12 years.¹

Loans offer business owners the option to get funded in an efficient manner. Additionally, if your immediate focus is on monthly affordability, you can customize your financial solution by choosing an extended repayment term.

Then, even if your needs change, the flexibility of a loan allows you to use your funds in multiple ways as long as they remain for personal or business use, depending on the specific solution.

These are the primary differences as well as the advantages of grants and loans, respectively. If you would like to learn how BHG Financial can pair you with the right financial solution for your needs, you can get started online today by checking out your personalized estimate here.

Not all solutions, loan amounts, rates or terms are available in all states.

¹ Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile.

² BHG Financial business loans typically range from $20,000 to $250,000; however, well-qualified borrowers may be eligible for business loans up to $500,000.

For California Residents: BHG Financial loans made or arranged pursuant to a California Financing Law license - Number 603G493.

No application fees, commitment, or impact on personal credit to estimate your payment.