The Different Types Of Small Business Grants
There are two main types of grants: government and private.
To find federal and state grants, you can browse government databases based on your location and industry. But these are often paid services that are poorly organized and outdated.
Corporations provide grants to small businesses as well. These private grants usually have less rigorous application requirements, but more competition for funds.
You can also apply for a foundation grant. This is another kind of private grant, but instead of a corporation, youâll receive grant money from a charitable foundation.
Unfortunately, the internet hasnât invented a one-stop database where you can search for every kind of grant. So weâve compiled a list of the top government and private grant databases, complete with quick navigation links.
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Grants can be formed to target businesses based on a variety of factors, including minority-owned businesses, specific for-profit businesses as well as non-profit organizations, veteran-owned businesses, grants for women, and more.
You dont have to make your pitch on Shark Tank, refinance your home, or take out small business loans to take the next step in your entrepreneurial journey business grants may help you get there, if you know where to look and how to apply.
And right now, with so many small businesses struggling through the pandemic, these grants can provide much-needed financial support that could be the difference between thriving or closing your doors.
Weve pulled together numerous resources for business owners searching for small business grant opportunities. The majority of these have broad grant application requirements, meaning many businesses qualify.
Keep in mind that this can be a double-edged sword for applicants, though you can apply for a lot more business grants if the qualifications are broad, but that means more competition for the grant. Often, you can find more success by finding niche grants for your industry, or based on your ownership structure and makeup.
What Is A Grant
A grant is financing that does not require repayment by one party to the other. Grants are frequently offered by philanthropic organizations or government agencies in order to finance a specific project by an individual, educational institution, non-profit organization, or for-profit organization.
To make that process of finding free money a little easier, here is a list of several federal, state, and specialty websites that offer resources or grants for small businesses.
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Alternatives To Small Business Grants
Lines of credit are available to you at any time. Their downside is that they have limits, which are higher than a credit card but much lower than an installment loan. Before signing up for a line of credit, make sure it is large enough to meet your needs. If it isnât, you run the risk of accumulating debt without accomplishing your goals.
Small business loans can go a long way towards turning your small business plans into reality. The downside of small business loans is that the interest rate can depend on your credit score.
In addition to using traditional banks for a line of credit or a small business loan, we recommend that you consider online lenders
How Can A Business Be Approved For A Government Grant
Even though a grant from the government is an ideal form of business funding, it does come with some caveats. First of all, you need to apply for a government business grant. There are plenty of programs for small businesses that provide grants, and chances are good that your business will qualify for at least a few of them. Unfortunately, meeting the qualifications of a grant and being approved for a grant are two different things. It is quite possible that you will apply for a grant only to be turned down. In most cases, the businesses that are usually approved for government grants are in areas such as research and development, technology, and medical fields. These are usually the kinds of businesses that can benefit the rest of the country and are therefore more likely to gain the attentioni of the government.
The second issue associated with government grants is that they are very specific on how your approved business funding can be spent. If you receive a business grant for the government, you are only allowed to spend that money on certain expenses, mostly on things that will help you business develop. The application process involves stating exactly how your business funding will be spent, and you cannot deviate from that. On the other hand, the rules are far more flexible when it comes to how a business loan can be spent.
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Realize That The Age And Size Of Your Business Matter
Small businesses have a tough time finding funding than established enterprises. Also, the size of your business plays a role in the amount of funding you qualify for. Youre likely to pay a higher interest rate if your sales are less than $500, 000. Research also shows that you may pay a higher interest rate if you have less than ten years of experience in the business.
Hard Facts To Know Before Applying For Government Grant For Small Business
i. Grants Are Not for Everyone
Grants are given to groups or individuals who meet a very specific criterion. The idea behind grants is not about offering free money which individuals can use to purchase luxury item or even houses. However, the government will provide block grants and other types of grants that will help community projects and that will enable low income families to find affordable housing.
That is to say that most grants of this type are offered to non-profit organizations. But dont be discouraged just yet federal and state grants can also be made available to individuals who fall within the scope of what the agency has to offer.
Government grants are classified into two main categories:
The type of grant will vary depending on the organization and your personal situation. Popular grants that are given out by the federal government include education, disaster relief and prevention, energy, environmental quality, housing, natural resources, regional development, agriculture, community development, research, among others.
2. Determine your Agency
There are a number of things that can exponentially improve your chances of getting a grant. They include
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The Cons Of Small Business Grants
Unfortunately, there are a number of cons associated with small business grants.
Because grants are essentially free money, there are many hidden âcostsâ associated with themâincluding your time. Typically, grant applications require a lot of paperwork. In addition to the application, you and your small business will also have to provide additional documentation such as demographics of your market, your product or service and your specific reasons for applying for the grant.
In your application, you will be required to show specifically and with great attention to detail how you will use the grant funds, should they be awarded to you. This may involve charts, graphs, budget numbers, market demographics, and projection sheets that will paint a picture of your intentions. This is time-consuming and often requires many hours of research, planning and organizing. Since grants are essentially free money, the issuer may require you to show how your small or online business will use the grantmoney to benefit the society at large.
After all the time you spend on the application process, be prepared to wait even longer for the response. It takes weeks and sometimes months to find out if youâve been approved or not for a smallbusiness grant. This can be very frustrating, especially if you, as the small business owner, are in need of the funds quickly.
Why Do They Want To Help You
You are probably wondering why anyone would want to help out little old you. Well, aside from the fact that you undoubtedly deserve it there are some vested interests on behalf of the granters.
The US federal government and President Obama understand that in order to stimulate the economy and keep the US from sinking into a deeper recession, people need money. Helping individuals pay their bills and fund their companies, are relatively small initiatives that will see greater rewards. Money spent on free grant money for American citizens will be money gained increased tax revenues at government disposal and a more money spent by Americans on a day to day basis.
Private foundations, on the other hand, have a slightly more selfish purpose for their generosity. These foundations are usually wealthy corporations that give free grant money to individuals and small businesses for the subsequent tax breaks. These organizations are required to distribute 5% of their total assets each year to maintain tax exempt status.
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Small Business Grants For Minorities
Here are some small business grants for minority-owned businesses:
- SBA 8 Business Development Program: Though not specifically a grant program, the 8 Business Development Program enables small businesses owners from socially or economically disadvantaged groups to be eligible to compete for certain federal government contracts. To be eligible, the business must be at least 51% owned by someone who has faced racial or ethnic prejudice or cultural bias.
- Operation Hope Programs: Operation Hope offers several programs to equip small business owners for success in low-income communities, including their 8-week entrepreneurship training program. Their One Million Black Business and Entrepreneur Initiative works to close the racial wealth gap in the U.S. by helping Black entrepreneurs start or grow their business through training and coaching.
- Minority Business Development Agency: As part of the Commerce Department, the MBDA helps Black, Latino, Asian American, Pacific Islander and Hasidic Jewish businesses owners apply for federal contracts. They provide guidance for small businesses applying for federal grants.
Government Grants For Small Businesses
Government grants are a desirable source of funding for many small businesses. Well-known sources for government grants include agencies like Grants.gov, Challenge.gov, the U.S. Small Business Administration , and the U.S. Economic Development Administration , but small businesses should look to every tier of the government to find the best grant for their business.
If this is a funding option you are considering, check out these government grants for small businesses.
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Federal Business Grants For Small Business
Although there are plenty of federal business grants for small businesses, they are primarily open to companies in the science, technology, or health fields. If your business is involved in research and development or in scientific initiativesâincluding environmental and climate initiativesâthen federal grant programs might be able to cover some of your expenses and help with your small business funding.
Here are the top federal business grants for small business:
Do I Need To Accept An Economic Injury Loan In Order To Get The Grant
No. You can decide just to accept the grant you receive and do not have to accept an Economic Injury Disaster Loan.
But such a loan may be very helpful. Here are the key features of these loans:
- Loans up to $2 million
- Fixed interest of 3.75%
- Repayment term of up to 30 years
- Your business had to be operational on January 31, 2020
- Loans may be used only to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the pandemic not occurred however, if you plan to couple an EIDL with a PPP, you cant include payroll. The programs are intended to complement one another and therefore not result in duplicate resources.
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Types Of Small Business Grants
There are several types of grants, and you may only be eligible for certain ones.
First, there are grants offered by the government. This includes entities like the U.S. Small Business Administration and more niche departments such as the National Institute of Health, which will have industry-specific requirements for applicants.
Then there are grants offered by private companies. These may be more general and open to a wider base.
Some grants target specific groups, like women or minority entrepreneurs or veterans.
Currently, we also have grants aimed to help those negatively impacted by the coronavirus pandemic.
Have A Solid Business Plan
Everyone who would consider giving you a business grant needs to see a comprehensive business plan. Your business plan needs to outline financial details like cash flow projections, a balance sheet, and an income statement.
If you dont have any knowledge on creating a business plan, no need to worry, you can get help from government-supported organizations and Canadian Business Centers Business plan software is beneficial. You can also go online and learn how to research and write each part of the business plan.
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Small Business Innovation Research Grants
In an effort to support small businesses focused on technological and scientific goals, the Small Business Innovation Research provides grants to fund specific projects. Browse across projects for agencies from NASA to the Department of Health and Human Services grants that tie in with your business and your expertise, then complete the three-part application process.
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Grants And Help For Your New Business
If youve launched a new business or become self-employed, help is at hand. Government support such as grants, low-cost business advice and mentoring will help you get off the ground.
Help from the government shouldnt be mistaken for free money. If your business is still young, most government assistance focuses on building your skills and knowledge, and linking you with advisors and networks.
There are many free or low-cost opportunities available if youre in the early stage of business.
The more fully formed your business idea is, the more help youll be able to get. Whether youre self-employed, own or run a business, its a good idea to do some business planning before you approach any advisors, mentors and funding officers.
One Time And Renewable Grants
The one time and renewable grants are provided to small business owners who may be eligible as a direct form of payment by the Ontario government, to help you cover the costs of your small business.
Generally speaking, the one time grant and the renewable grant are two different types of grants
The one time government grant is provided once to help you as a small business cover your business expenses.
Depending on the type of expenses, these grants may also be renewable, each quarter, or each year.
Most of the renewable grants will be focused on going green, providing training for your employees, or hiring staff.
To see if you Ontario small business qualified for any one time or renewable government grants, you can speak to a Ontario funding expert via the Small Business Startup Platform.
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Are There Any Downsides To Business Grants
A variety of factors make many business owners skeptical of the free money that business grants offer. While every grant has a different application period, rules, terms, and conditions, here are some potential downsides you should keep in mind when applying.
As mentioned above, business grant funds are taxable income for IRS purposes. The funds will still be free money for your business, but you will need to make sure you dont spend the entire payout without planning for the added income in your tax bill.
Business grant applications take time. Youre already a time-crunched business owner wearing a million hats, do you really have time to apply for every business grant opportunity you come across? Its a valid complaint about business grants. The likelihood of winning the grant can be small depending on the size of the contest, so you have to make your own cost/benefit analysis to figure out if your most precious asset time is worth it.
Small business grants may require campaigning. Many business grants require a social media component, where you campaign or share something publicly about your grant application. Thats not necessarily a negative if you have an active and vocal social media following, but campaigning does take additional time and some business owners may understandably not want to be as public about their search for money.
This article was originally written on November 19, 2019 and updated on August 23, 2021.
State And Local Small Business Grants
Small Business Development Centers: The SBDC offers assistance for small businesses and entrepreneurs. They are frequently connected with local universities or a states economic development agency. The SBDC can also help connect you with other financing options, mentors, and networking opportunities.
Economic Development Administration: The U.S. Department of Commerce maintains this agency as a source for grants and technical assistance in an effort to promote and encourage innovation and entrepreneurship. Each state has a website to find financing.