What You Need to Know About Small Business Grants

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businessloans-business grantsBusiness grants are funds available to businesses and are designated to promote a particular project or mission. They are offered by Federal agencies, State governments, foundations, and local communities, and unlike a business loan, there is no requirement to repay the funds—provided the business use promotes the grant’s purpose.

With that said, the idea of grant money “free for the taking” is kind of misleading. While grants are available, they are targeted at a very narrow field of prospective businesses.

Often small business grants are designed for purposes like revitalizing downtown business districts or other neighborhoods. Many business grants are intended to encourage job creation in struggling neighborhoods. Therefore, in addition to investigating grants offered by Federal or State governments, you should also contact the Mayor’s Office in your city to see if there are any community-based grants available in your area.

Grants from the Federal government are authorized and funded through bills passed by Congress and signed by the President, and include strict guidelines when it comes to eligibility.  For starters, Federal and State governments seldom provide grants for starting a new business, paying off debt, or to cover personal expenses.

While Federal agencies like the SBA, USDA, DOE, and other agencies offer grants, they are typically aimed at specific industries and causes identified by the grantor.  The Federal government publishes grant opportunities at grants.gov.

The SBA has authority to offer grants to non-profit and educational organizations, but does not have authority to make grants directly to small businesses. According to the SBA, some business grants are available through state and local agencies for initiatives like:

  • Expanding child care centers
  • Creating energy efficient technology
  • Developing marketing campaigns for tourism
  • Scientific and medical research
  • Advancing regional economies

That said, these grants shouldn’t be considered free money as they sometimes come with a requirement for the recipient to provide matching funds or combine the grant with other forms of financing such as a small business loan.

Applying for a grant can sometimes be a daunting process that requires some homework and a strategic approach to researching and applying. Here are some things to consider when seeking a grant:

You need to create a grant proposal: This is a document that outlines the nature of your business and includes a detailed business plan that describes how you will use a grant to meet the mission objectives of the grantor. You’ll want to include detailed goals and objectives along with timelines and financial projections to show how your business plan will either break even or become self-sustaining. The grantor will give you more specific requirements that apply to the specific grant application.

Grants are available for specific industries: State, Federal, and local grants may be available, but you’ll need to spend time wading through agency websites looking for a potential grant that might be a fit for your business. Start with the grants.gov website to see if there are grants offered for your industry. State and local governments may also have similar resources if grants are available, and other nongovernmental organizations also may offer grants.

Grant amounts vary: Grants from a couple hundred dollars designed for micro-enterprises, grants for medical research for millions of dollars, and everything in between is available. Knowing how much money you need to meet your objectives will help you avoid looking for a grant (or grants) that won’t meet your needs.

Multiple grants are available if you qualify: As long as you qualify, it’s possible to obtain more than one grant, but it will be important to identify any other grants you may have received when applying for a new grant.

Applying for a grant will likely require patience: Once the grant is approved, it often doesn’t take much time for funds to be transferred to your account, but the approval process can take anywhere from a few months to a year in some cases.

Does your business provide value to the community? To qualify, your business should perform a service for society at large or meet a local community need. Creating jobs in an underserved community or medical research for curing disease are both good examples.

Applying for a grant is not for the faint of heart, but can be a good option if your business qualifies, you’re willing to do the research, and don’t need the funds immediately.

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