A loan is a debt incurred by a company or organization, over a fixed period of time, and needs to be repaid with interest. The loan appears on the balance sheet as a liability. Loans can be made from family and friends; from financial institutions (Banks & Credit Unions) and from investors (Angels and Venture Capitalists). Regardless of the source of the funds, the loan should be treated the same way and interested should be charged and paid by the respective parties.

A grant is a gift from either a government or private organization and is given for a specific purpose for the “public benefit”. To a company or organization, a grant appears on their balance sheet as an asset and does not need to be repaid. Applicants need to prove that they can fulfill the specific purposes of the grant.

Unlike what you see on late night television or published in some of the newspapers and magazines, there are no government grants for private companies unless they are involved in very technical research in the military or health arenas or they do business in certain designated geographical areas and contribute to the economic and job growth of the residents of that area.

Banks typically make loans between $2,500 to $100.000 with an interest rate up to 5% above prime. Applicants need a well written Business Plan and stellar personal credit ratings for the principals. For companies that appear risky, the banks may request that the SBA guarantee the loans and if the companies meet the requirements an added 2% is needed for the guarantee.

Another method of financing would be to obtain a “Personal Equity Line of Credit” or “Personal Equity Loan” from a bank for the business.