Small businesses make up a huge part of the American economy; more than 99% of American businesses are small businesses. As such, the U.S. government has a strong interest in small business growth, as well as ensuring small businesses’ success. In fact, the role of small businesses is seen as so important, there’s even an official National Small Business Week celebrated each year since 1963. Beyond this recognition, however, there’s a bottom-line need to help build businesses. And one of the ways the different levels of government are able to help – alongside the private sector –is through small business grants.
Why Apply for a Small Business Grant?
Everyone loves free money, right? True, a grant beats a loan in that you usually don’t have to pay the money back. Though keep in mind, some grants will require that you bring some other form of financing to the table as well. The other basic advantage is that unlike money you receive from traditional investors, you won’t have to give up equity in your company when getting a small business grant.
How to Get a Small Business Grant?
In a nutshell, the competition for small business grants is generally fierce. You will need to meet a stringent set of criteria, according to the grant you’re applying for. You’ll usually need to provide a lot of personal information, include a very strong business plan in your proposal, and possibly submit details down to things like proof of general liability insurance or even small business insurance tailored to your line of work.
Even after you receive the money, you will be expected to follow strict reporting measures that ensure you’re using the money wisely. If you don’t hit the pre-determined benchmarks, you may be obligated to pay some of the money back. So make sure to read the fine print on any grant structure before you take the money, or even apply.
Where Can You Get a Small Business Grant?
There are many places to get grants for small business startup costs, as well as continued operations. These include the private funds of various companies, a variety of non-profits, and even banks. In addition, there are government grants for small business owners.
You’ll likely need to do a fair bit of research to find grants you qualify for, and at the same time, meets your business needs. Some people turn to financial advisors to help them in the process. A tailored Google search is also a good choice, or the website Grants.gov, the government’s official database for these matters.
Federal Small Business Grants
If you’re looking for government grants to start a small business, the U.S. Small Business Administration (SBA) is not the route to go. That’s because, somewhat surprisingly perhaps, it only gives grants for exporting, scientific research and development purposes. What the SBA can do, however, is assign you a counsellor to help you find funding, raise capital or even secure loans.
- Pros: Great for certain lines of business like high-tech and R&D fields.
- Cons: Very difficult to get, and cannot be used to start a business, pay-off debt, or operational expenses.
State Grants for Small Businesses
While the federal government won’t give you grants to open small business, it does give some money to states to pass on for such purposes. In addition, many states have grants available for small businesses of various types. Some are for meeting local needs like expanding a daycare center to meet a neighborhood’s needs, or propelling energy-efficient technology. Others reward general entrepreneurship. Again, these are very competitive and usually not that large. You can have a look on Grants.gov to see what’s on offer. You can also try the GrantWatch site, which is state-specific.
- Pros: There are more options available at the state level, covering a wider range of fields.
- Cons: Many require that you match the funding you receive, and few offer large sums.
Other Grants for Small Business Owners
Outside of government, there are actually a fair number of sources to turn to, when pursuing a grant. For example:
- Women-only grants – There are women-specific grants like the Eileen Fisher Women-Owned Business Grant Program which gives up to 10 women-owned businesses a grant of no less than $10,000 each year.
- Minority grants – There are a number of grants available to minority populations. The Minority Business Development Agency is probably the best source to turn to for details.
- Armed services grants – Current and former armed service personnel (and their families), can apply to the StreetShares Foundation for one of its three annual grants.
- General grants – Just about anyone can apply for certain grants like the annual FedEx Small Business Grant Contest or the Miller Tap the Future Contest.
In other words, there are free small business grants out there, but like free lunches, they’re hard to come by. More succinctly, even if you land one, always remember it comes at a cost. As part of each application process, find out what you need to do to secure the grant, and the expectations you need to fulfill to keep your grant funds.