What Is a Business Grant?
If you’re an entrepreneur, free money is most likely an exciting prospect for you. Small business grants offer an opportunity to get much-needed funding without having to pay anything in return or exchange existing assets.
Recommended: Read our list of the best small business grants.
What Is a Business Grant?
A business grant is a sum of money for small businesses and, unlike business loans, you don’t have to repay a grant. Grants are typically awarded by government institutions, private businesses, and other organizations. A drawback of business grants, however, is that many companies will not qualify for them, and competition is fierce among those that qualify.
Pros of Small Business Grants
- You do not have to pay small business grants back. Once you’ve qualified for and received the grant, the money is yours so long as you follow the stipulations and requirements of the grant.
- They are super easy to find online. You don’t have to search high and low for small business grants to apply for; you can easily find them through a quick online search cost-free.
- There is an increasing number of grants available. In recent years, the number of grants has grown, making it a little less competitive to get one of your own.
Cons of Small Business Grants
- The application process can be taxing. Grants are challenging to obtain, as there are specific requirements your venture has to meet during the application process. Additionally, applying for small business grants can be extremely time-consuming due to the amount of paperwork required to apply.
- There may be strict requirements for how you spend the money. This type of funding often comes with guidelines for how businesses spend the money, so you cannot use it to cover certain types of business expenses.
- Government grants can be unattainable for certain businesses. Unless your company is a nonprofit or focuses on education, medical research, or technology, finding a government grant can be difficult.
How Small Business Grants Work
Small business grants are obtained through a competitive application process and only issued if your company meets the qualifications and fulfills all the requirements. The greatest appeal of grants is that entrepreneurs do not need to pay any money back to the funding source. However, there are typically stipulations that designate how the money is spent within your venture.
For example, if your grant is to fund technological research, you cannot use the grant money to supplement payroll or any other expenses. Otherwise, you may be required to pay the full amount of the grant back to the provider.
Types of Business Grants
Business grants are not “one size fits all.” Depending on the type of company you’re operating, your location, or who you are there are different grants that you may qualify for. The four types of business grants are federal, state, corporate, and specialty.
Federal Small Business Grants
Federal grants make up the lion’s share of grants available to small businesses. The process of applying for federal grants can be time-consuming, but it is worth it if you qualify for funding through this channel. The most likely candidates to successfully obtain a federal business grant focus on education, environmental research, medical research, or technology.
State Small Business Grants
There are also small business grants available at the state level. These range from grants for innovation-focused ventures to grants for rural-based companies. However, since many of these grants aren’t particularly specialized, the application process can be fairly competitive.
Read our list of the best federal and state small business grants.
Corporate Small Business Grants
Some large corporations, such as FedEx or Visa, offer small business grants to support entrepreneurs. If you compete and win grants offered by large corporations, you can often get large sums of money to put towards your company's needs. However, this means competition for these grants is fierce, so whether it's a contest or a pitch competition, you’ll need an effective strategy to compete.
Read our list of the best corporate small business grants.
Specialty Small Business Grants
Intended to make entrepreneurship attainable for all demographics, private companies, organizations, and the US Small Business Administration (SBA) provide specialty grants that support specific communities. Companies owned by women, minorities, and veterans may qualify for specialty small business grants.
Small Business Grants for Women
Securing funding for any small business can be a challenge, and unfortunately for women-owned small businesses, the challenge can be even greater. Grants make securing funding for women-owned ventures easier. From grants for female-owned small businesses that contribute to positive change to jewelry makers, there are a variety of grants available from organizations intended to empower female entrepreneurs.
Read our list of the best small business grants for women.
Minority Small Business Grants
Minority-owned businesses are an essential part of the American fabric; however, this demographic of entrepreneurs often face a unique set of challenges, including securing funding. Fortunately, many organizations and agencies offer resources to help financially support businesses such as innovative Black-owned startups or Native American projects and organizations.
Read our list of the best minority small business grants.
Small Business Grants for Veterans
For veterans who have started businesses after serving our country, there are various well-deserved grant options available. From grants to get their company started or provide support after they’ve begun operating, there are many potential funding opportunities for veteran-owned small businesses that qualify at every stage of operation.
Read our list of the best veteran small business grants.
How to Get a Business Grant
To get a business grant, you first need to do thorough research to identify the grant(s) that you may qualify for. Generally speaking, it’s a good idea to apply for the most specialized grant you can qualify for in order to limit the number of other businesses you will be competing against.
Next, the application process. Every grant application will vary in requirements and formatting. For example, one grant application may require a thorough analysis of your company's growth and development while another may require a video essay. There are, however, a few things that you can expect to include in your application across the board:
- The number of employees your company has. Typically, small business grants pertain to businesses with few employees.
- Your monthly and yearly revenue. If your venture makes over a certain amount monthly or yearly, you may have trouble securing a small business grant.
- The amount of time you’ve been in business. While there are grants that apply to starting a business, many are reserved for companies already in operation.
Alternatives to Small Business Grants
If your company doesn’t qualify for small business grants or if you don’t have the time to commit to the application process, there are a multitude of alternatives to source funding for your company. From loans to building your own savings account or even funding your venture yourself — the possibilities are extensive.
Small Business Loans
Small business loans can be awarded from banks or other financial institutions and must be repaid according to the rules of the loan. A loan can help resolve cash flow problems, increase the value of your venture, and encourage growth.
Business Line of Credit
A business line of credit is a fixed amount of money allotted to a company that is typically used for smaller expenses. Like a personal credit card, a business line of credit is revolving which means once you pay off the balance owed, you are able to spend the amount again.
Friends and Family Loans
Friends and family loans are a common source of funding for new entrepreneurs. However, in order to avoid a negative impact on your personal relationships, it is important to ensure there is a solidified repayment plan as well as a written agreement.
Personal Savings
Most small businesses are still started by “bootstrapping,” otherwise known as using personal savings rather than outsourcing funding. While this does require a great deal of commitment and self-discipline, it is a great, no-strings-attached method of funding your business.
Crowdfunding
Crowdfunding has increased in popularity in recent years and has become a good way to generate small sums of money from a variety of sources to get you closer to your goal. The benefit of crowdfunding is you aren’t necessarily indebted to one person or institution, and there is typically no obligation to repay the funding you receive.
Investors
There are two common types of investors for small businesses: venture capitalists and angel investors. Both typically invest in a company in order to receive a high return on their investment in the future. However, venture capitalists typically also invest in exchange for partial ownership or a place on the board of directors.
FAQ
Business grants are essentially free money for your company. If you qualify for a small business grant, you are awarded a sum that doesn’t need to be repaid. However, there are typically strict stipulations for how the money is spent within your organization that you must follow.
Start by doing your research. Finding a business grant that your company will qualify for is the first step. Next, you will need to understand and execute the application requirements in order to compete for the grant.
Every grant is different and qualifications will vary. However, companies that specialize in education, medical research, or technology are likely to find grants to qualify for as well as minority, women, or veteran-owned venture.
Unfortunately, there is no one easy grant to get. The easiest way to get a small business grant is to apply for the most specialized grant you’re qualified for in order to limit the number of competitors you’ll have vying for the same pool of money.
