Grants vs Loans: What's the Difference?
The WEOC National Loan Program is supporting entrepreneurs, like Desya Hrytzak, as they start and grow their innovative businesses. Find out more about this flexible loan program at www.weoc.ca/loan-program.
If you’re an entrepreneur searching online for funding sources, using the right keywords – grant, loan, female, business, entrepreneur, woman, capital – are crucial to finding the best options for your business.
#Grants and #Loans for Women Entrepreneurs
We want to help break down the differences between the two most searched terms on the weoc.ca website: grants and loans. What do they mean for women entrepreneurs and how do you know which best suits your business?
Let’s get into what grants and loans are, and how they generally function.
What are Grants?
Very simply, a grant is money that doesn’t need to be paid back. Typically, they’re provided by organizations or individuals looking to support a specific niche or sector – this can be directed at the business type (to help someone set up a veterinary clinic, for example), the business owner (say, to support a member of the LGBTQ+ community), the location of the business (certain province or territory) or myriad other specific conditions or intersectionalities. They’re typically for a set amount of money, and the application process can range from quite simple to very detailed and complex.
What are Loans?
A loan is a sum of money that is given with the understanding and expectation of repayment, almost always with interest. Loans usually come from financial institutions but can also be offered by for-profit and non-profit organizations, or even simply between two (or more) people. There is often more flexibility around what the loan funds can be used for, as well as for the amount being loaned. For example, the WEOC National Loan Program offers loans of up to $50,000.
The loan application process will very likely have requirements regarding a business plan, collateral or credit scores and personal financial information. You’ll also have a “term”, referring to the time in which you’re expected to pay back the loan, as well as a payment schedule.
What are the Pros and Cons?
Both funding options have a lot of things going for them, and a few things that may be less attractive to you, depending on your needs. Let’s break it down into a chart to show a side-by-side comparison.
| Grant | Loan | |
| Repayment | Not required | Required under set agreed terms regarding payment schedule and interest. |
| Eligibility | Often designated for specific demographics, regions, etc. | Varies depending on the lender |
| Amount Available | Set amount | Flexible amounts |
| Availability | Often quite limited, which means there may be many applicants vying for the same dollars. | Myriad loan programs, but access varies, and many women entrepreneurs encounter barriers in the application process. The WEOC National Loan Program was established to reduce barriers. Read more in Bootstrap or Borrow report. |
| Application and Reporting | Application process can be time consuming and take weeks or months before an answer is received. There are often set deadlines for application submissions and specific dates for disbursement, which may be done in phases. Reporting is required, in detail and on a regular schedule. | Usually available at any time, and turnaround times can vary. Applications typically require a complete business plan, including cashflow projections, as well as personal financial information such as a net worth statement and a credit check. Reporting is generally limited to submission of financial statements. |
In Summary
With this information, it may become clear that one or the other may be better suited to your business needs, or you might want to look at a mix of the two, addressing multiple situations with a variety of solutions. For further information, reaching out to a business advisor in your region (check out our members here) can help you find what resources are available to you, To learn more about the WEOC National Loan Program, click here or email us at [email protected].