6 Best Loan and Grant Options for Starting a New Business in Illinois
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To run effectively and overcome the hurdles that characterize startups, you need to boost your business with either a grant or loan. However, whereas grants are not repayable, they demand paperwork, approvals, and stringent qualification criteria.
Loans are repayable, and the lending authority takes precautions to ensure their interests are secure. However, you may have to provide collateral and carry insurance to protect while noting the bank’s interest.
Listing of the Best Loan and Grant Options for Starting a New Business in Illinois
Small Business Administration Microloans offer lumpsum financing for startups through financial institutions and other lenders. The maximum SBA Microloans available to a single business is $50,000 at an interest rate of 8%-13% for a term of up to six years.
Microloans ideally focus on those at a disadvantage, such as women and minorities. In addition, microloan lenders work closely and offer small business owners training and mentorships to make the best use of the funds.
Asset-based financing takes the asset as security for the loan. Asset-based loans include invoice financing, real estate, equipment financing, among others. As regards invoices, the financiers give funds against outstanding invoices and recover their money when the company settles.
A startup can acquire assets through 100% equipment financing and repay with interest over a given period.
Business Credit Cards
Business credit cards form of financing is suitable for startups that need soft financing arrangements. Business credit cards are [popular with startups as they are easily accessible at any time without the need for collateral. In addition, some credit cards offer lengthy grace periods, and you can utilize the funds and repay with no interest before the period lapse.
Taking a personal loan implies that you borrow a loan in your capacity to boost your business. Such a loan is easier to qualify for and attracts low-interest rates than business loans. In addition, the loan is suitable for a startup with no records, yet the owner personally has healthy financial records.
However, you must take caution as failure to meet repayment obligations will negatively impact your capacity. Should the business fails, you will still be personally liable to all costs and legal suits.
Small Business Grants
Grants are available throughout Illinois and are the most affordable funding source for starting a new business. The government, state, local governments, corporations, and nongovernmental organizations own the loans.
Getting one requires that you research a suitable grant and meet the requirements. Some grants are specific to certain fields such as science, technology, and innovation. Some grants are reserve for women and minorities, veterans, and immigrants. However, grants are very competitive and require adequate preparation and documentation.
Crowdfunding raises funds through innovations and creativity by using campaigns and networks on specific platforms. Your goal will be to reach as many people as possible to hit your target.
Crowdfunding is the best alternative when you fail to acquire financing from traditional sources. However, crowdfunding may take a long to generate adequate capital to meet your target as most people you are soliciting funds from may not be so generous.
You can also involve your friends and family members to supplement your capital requirements.
Wrapping it Up
Not every funding option works the same way for different businesses. The best loan and grant options for starting a new business in Illinois should be one that you can afford and meet your unique business needs.
Generally, startups find difficulty accessing financing, but with collateral, the lenders usually lax their requirements. As a result, funding asset-based is more appealing to new businesses because of collateral. On the other hand, grants are industry-specific, meaning that your business must belong to a specific category for you to qualify.
Whether your business needs a loan or not boils down to your ability to service the facility. Banks lend money to businesses in the hope that they will repay when the time comes. As such, your new business may not get funding as its history is not evident, and you would need to consider several alternatives.