Small business grants can be a game changer, providing much needed funding to kickstart or expand your entrepreneurial venture. Unlike loans, grants do not need to be repaid, making them an attractive option for many startups and small business owners.
In 2022, over $75 billion in free government grants were made available to small businesses in the United States. Competition is high but with proper research and planning, there is funding available for all types of businesses across different industries and locations.
This comprehensive guide will explain everything you need to know about small business grants – from types of grants to the application process. Let‘s get started!
What Are Small Business Grants?
Small business grants are sums of money provided by government, non-profit or private organizations to help start or grow a small business.
These grants do not need to be repaid like loans, as long as the business uses the funding for its intended purpose and complies with all grant regulations. The eligibility criteria varies by grant program but is generally focused on startups, minority-owned businesses, women entrepreneurs or businesses in distressed areas.
Here are some key facts about small business grants in the US:
- Over $75 billion in free government grants awarded annually
- 1 million+ businesses receive grant funding every year
- Average grant size ranges from $5,000 to $25,000
- Funding from 500+ federal, state and private grant programs
Types of Small Business Grants
There are many different types of grant programs tailored to different business goals, industries, owner demographics and geographic locations.
Here are some of the most popular categories:
Government Grants
Government grants include funding opportunities from federal, state, county and city level grant programs focused on small business growth.
Some major examples are Small Business Innovation Research (SBIR), State Trade Expansion Program (STEP) and the State Small Business Credit Initiative (SSBCI) grants.
Minority & Women Business Grants
These provide funding to business owners who belong to minority groups or businesses with 51%+ woman ownership.
Top options include Amber Grant for Women, Cartier Women‘s Initiative Award and Disadvantaged Business Enterprise Certification.
Sustainability & Green Grants
For eco-friendly businesses, green grants help launch or expand operations while minimizing environmental impact.
The USDA‘s Rural Energy Grant, EPA Pollution Prevention Grant and Whole Foods Local Producer Loan Program are some examples.
Technology, Research & Development Grants
STEM-based startups can benefit from federal and state innovation grants supporting research in science, tech, engineering etc.
The NSF Small Business Innovation Research (SBIR/STTR) and USDA‘s Small Business Innovation Research are some leading technology grants.
There are also industry-specific grants in agriculture, food businesses, childcare, arts organizations etc. Community building grants help boost economic growth in lower-income areas.
New business ideas often get startup grant funding while established small businesses can qualify for expansion grants.
Small Business Grant Eligibility
Since grants involve taxpayer dollars, the funding organizations want to ensure it helps businesses that align with their goals.
The eligibility criteria varies greatly but often includes factors like:
- Business structure (LLC, Partnership, Sole Proprietorship etc)
- Time in business
- Annual revenue or number of employees
- Business industry or sector
- Demographic groups – minorities, women, veterans, tribal businesses
- Credit scores
- Geographic location
For example, the USDA Rural Business Development Grant supports businesses in rural areas with under 50 employees and $1 million or less in annual revenue.
On the other hand, the Cartier Women‘s Initiative Award is open globally to women-led businesses under $1 million in revenue that have existed for at least 2 years.
So you need to research the grants carefully to ensure you meet all the criteria before investing time in the application process.
How To Find Small Business Grants
With hundreds of options, finding the right small business grant for your specific business can feel overwhelming. Here is a step-by-step process to follow:
Check Government Grants Portals
The first stop for any small business grant search is Grants.gov – a central storehouse for over 1,000 federal grant programs. You can browse or search by keywords like "small businesses".
Most state economic development agencies also have a grants section highlighting funding opportunities for local businesses.
Search By Business Type, Location & Demographics
Look for grants suited to your business industry, target customers, location or owner demographics.
For instance, Asian, Black or Hispanic business owners can find minority business grants for their ventures. Similarly, industry-specific groups and non-profits offer grants – for example, the American Dental Association offers grants for dentists.
Leverage Small Business Associations
Industry trade groups and small business development centers also offer grants assistance. They have partnerships with corporations and other granting organizations suited to their member base.
For example, the National Retail Federation foundation provides over $400,000 in small business grants annually.
Explore Non-Profit & Corporate Grant Makers
Beyond government funding, private grants can be a crucial source of support for small business grants for startups and existing businesses.
Groups like Hello Alice, FedEx, Visa, Verizon, Amazon and Coca-Cola also offer small business grants and free funding.
How To Apply For Small Business Grants
The grant application process involves paperwork and can be competitive. Here are some tips to improve your chances:
Understand The Guidelines
Carefully go over the grant eligibility, documentation needed, judging criteria and application instructions. Follow them to the T!
Describe Your Funding Goals
Explain clearly what you will use the grant money for and how it will grow your business – whether it is buying equipment, hiring a web developer or moving into a new facility. Share why the funding is crucial for the next stage of growth.
Highlight Competitive Advantages
What makes your business, products or services special? Convey your unique value proposition and competitive edge to stand out from other applicants.
Provide Financial Statements
Most applications require past years’ tax returns, current balance sheet, profit/loss statements, cash flow reports and financial projections. These give insight into the viability of your business.
Build A Strong Grant Proposal
A well-written grant proposal covering all key areas is vital for approval. Follow the exact grant guidelines and formatting requirements.
Request Letters Of Support
Ask partners, suppliers, customers or community members familiar with your business to write recommendation letters highlighting contributions.
Managing And Reporting On Grant Funds
Getting the small business grant is the first step. You need to ensure you utilize the funding responsibly and transparently.
Tips for managing grant money:
- Set up a separate bank account and accounting system to track grant expenditures
- Spend only on allowable costs mentioned in grant agreement
- Maintain meticulous financial records like receipts, invoices & bank statements
- File expenditure reports by set deadlines
- Keep grant making body updated on business progress
- Follow rules related to branding, signage, events etc.
Misusing grant funds or not complying with guidelines could result in legal action. You may even need to repay the money. So pay close attention to grant compliance.
Grant Alternatives For Small Businesses
While small business grants provide the most flexible funding options, you may need to consider alternatives if not approved.
Small Business Loans
Government-backed SBA loans allow long repayment periods and offer fire disaster relief loans too. Microloans up to $50k require less paperwork for funding everyday costs.
Business Line Of Credit
A business line of credit from your bank gives access to a set borrowing limit that can be drawn down as needed to meet short-term working capital needs.
Crowdfunding
Online crowdfunding platforms like Kickstarter and Indiegogo let you raise small investments from a large group of individuals. You can secure funding while also testing market demand.
Angel & Venture Capital
These individual and institutional investors offer startups and small businesses capital in exchange for partial company ownership and sit on advisory boards.
Key Takeaways
- Small business grants help kickstart and sustain entrepreneurs with much needed funding that doesn‘t require payback.
- Understand eligibility rules carefully before applying and have all documents ready.
- Finding the most suitable grant for your business goals involves research across government and private resources.
- Managing grants properly, tracking spends responsibly and reporting progress is vital for current and future funding opportunities.
With thorough planning and a compelling application, small business grants enable ambitious owners to grow without taking on excessive debt. Consider applying if you need funds to take your startup or existing small business to the next level!
