In order to understand what makes small business grants so special, let’s first look at other popular methods for funding your business. Most entrepreneurs begin by investing a substantial portion of their own money into the business. Nobody likes watching their savings account dwindle, but you’ve got to start somewhere. And using your personal funds is required to qualify for financing, as most lenders want to know that you’ve got skin in the game before risking theirs on your behalf.
Speaking of risk, you can always ask friends and family for money. This approach might work if you have wealthy relatives known for their generosity. But it’s common for issues to arise when borrowing from loved ones, including the prospect of people actively avoiding you at family reunions (of course, you might consider this a silver lining).
“The reality is nobody likes being asked to part with their money,” says small business expert Geoff Williams. “And when you arrange to borrow cash from a friend or family member, you put yourself at risk of creating a strain in your relationship if expectations aren’t met, your repayment plan is vague, or you fail to make a payment on time. But as challenging as it can be to ask someone like a parent or pal for money, it can be an even greater struggle to pay him or her back, depending on your financial situation.”
Finally, you might look at getting money from angel investors. This option is tempting because the funds don’t need to be repaid if your business fails. But there can be complications tied to the fact that angel investors have a stake in your business and may want to be part of the decision-making process. In some cases, they might even try to take a seat at the head of the table.
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