A small business grant is a gift. Unlike a loan, it is money you don't have to repay. (However, grants are often taxable. It's a good idea to consult with a tax professional to understand your tax liability.)
Grant programs are available from local, state, and federal governments; private corporations; and non-profits. Each of these agencies have their own reasons for giving away money.
Government agencies award grants to serve the greater good, such as stimulating the economy, advancing technology, or creating a level playing field for groups that might not have equal access to capital and resources.
Private corporations use grant programs to advance or accelerate development of a particular industry or product category, or to polish their image as citizens of the community. Some non-profit organizations include grant programs as part of their charitable works.
Whether the grant is coming from the government, a private corporation, or a non-profit, obtaining it usually involves a highly competitive process. Indeed, many grant programs are even called competitions and the monetary award offered is often referred to as a prize.
If you have an immediate need for capital, such as replenishing inventory to meet an unexpected spike in demand, a grant probably won't solve your problem. It can take as long as a year to get through the application process and receive funding.
Eligibility criteria, entry requirements, and the amount of the grant offered varies, depending on the company or agency providing it and its purpose. Some grants are as small as $1,000 and others can be $25,000 or more.
Grants can be categorized by the kind of organization that offers them and the purpose they're intended to serve.
Knowing the kind of organization awarding the grant will help you identify grants for which you might be eligible, but getting one hinges not on who is providing the grant, but on how well your business and goals match the purpose of the grant and the eligibility criteria.
You'll have to tailor your grant proposal (more on writing grant proposals below) to show how you meet the requirements for eligibility and how you'll use the money to advance the mission the grant is intended to address.
Suppose you are a woman who owns a small business, and you are applying for a grant designed to promote small business growth. Even though some grants are designed to promote business ownership among women, you won't get very far with this grant by focusing on who runs the business. Instead, you'll want to show how you'll use the grant money to expand your business, offer your products to under-served communities, hire more employees, and accomplish other goals related to small business growth.
The various ways in which grants affect business and society include:
Developing specific industries. These grants are designed to invigorate a specific industry, like food and beverages or manufacturing.
Advancing technology. These grants promote the development and commercialization of new technologies or new ways to apply technology.
Increasing the number of new businesses. Small business startup grants assist new businesses that invent a new product or an innovative solution to a problem, such as manufacturing a commonly used product from sustainable materials in a way that hasn't been done before.
Supporting women-owned, veteran-owned, and minority-owned businesses. These grants target a single demographic group and award grants to companies whose majority owners belong to that group.
Except for the website grants.gov, which lists all grants offered by agencies of the federal government, you won't find a single clearing house that lists grant opportunities. You'll have to do a fair amount of digging to uncover the opportunities that best match your situation and needs.
Start with an internet search, using keywords like "grants for small business," "grants for veteran/minority/women business owners," "grants for business startups," "grant competitions for small business," and any other phrase that describes your situation.
Check with your local chamber of commerce and economic and small business development organizations to identify grants available in your city or region. SCORE, a U.S. Small Business Association partner that provides education and mentorship to entrepreneurs, can also direct you to local grant funding opportunities. The federal government and national organizations like the Chamber of Commerce provide grant funding for use by local agencies that, in turn, award the grants to small businesses. It's best to search for these types of grants at the local level.
Check the websites of large corporations in your industry, as well as national associations devoted to small business such as the NASE (National Association for the Self-Employed).
You'll have to follow through on each lead to find out whether your business fits the eligibility requirements, how much money the grant will provide, and how to apply.
Think carefully about your needs. If the stated monetary award isn't going to meet your financial needs (and you don't have other sources of capital to make up the deficit), the time you'll spend filling out the application and preparing a grant proposal might not be worthwhile.
Grants often come with conditions about how the money must be used, so it's important to evaluate your financial needs against the conditions of the grant. Keep in mind that many grantors will require you to report back on your progress meeting your goals and how you're spending the money. Likewise, read through the eligibility criteria very carefully so you don't end up spinning your wheels if you don't meet eligibility requirements.
Each grant application has its own set of steps to follow. Some ask for a formal, written proposal. Some ask for a video presentation and social media components. Even the information you must include in your grant request varies, depending on the organization providing the grant.
In general, you'll need to include:
Once you've gathered your documentation, follow these steps to complete your application.
If you're applying for a grant from a federal agency, you'll first have to pre-register on two websites, SAM.gov and grants.gov. The registration process alone can take up to six weeks, so make sure you've got enough time to meet the application deadline.
As noted, grant money might be free, but it comes with strings attached. The more you know about the grantor agency, their reasons for awarding grants, and their requirements, the better your chances of winning an award.
Each proposal is different, but nearly all are time consuming. Not only will you be required to provide a lot of information, but you'll have to structure your proposal so that those evaluating it don't have to hunt for the information they need.
Your proposal should provide as much detail as possible, and include a cover letter, table of contents, and an executive summary to help readers focus on important information.
The time it takes to complete a grant proposal might be reason enough to apply for only one grant at a time. However, no law or generally accepted business practice says you can't apply for multiple grants at the same time.
Some hopeful recipients apply for multiple small grants in hopes that if they get them, the sum will fund the business project. Grantors don't restrict you from applying for more than one grant, but it's probably unwise to depend on assembling several grants to achieve your goals. Each grantor will want to see that you can accomplish your goals with their one grant alone.
If you've received a grant in the past, it's a good idea to include that information in your application. Briefly explain how you successfully used the grant—this is reassuring information for any potential grantor.
Not only will it take time to prepare a grant proposal, it can take another six months to a year to find out whether you've won an award, and even longer to get the money. For this reason, applying for a grant isn't a quick fix for financial needs.
Most of the organizations that award grants won't let you take the money and run. Many impose reporting requirements and audit your progress in meeting the goals set.
Even if you aren't required to report back regularly, it's important to keep detailed records about how you used the grant money. If a grantor finds that you haven't used the money in the way it was intended, you might have to repay it (most grants include a provision of this nature in their paperwork).