What Is a Business Grant?

If you’re a small business owner, free money is most likely an exciting prospect for you. Small business grants offer an opportunity to get much-needed business 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. Business grants are typically awarded by government institutions, private businesses, and other organizations. A drawback of business grants, however, is that many businesses will not qualify for them, and competition is fierce among businesses 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 amount of small business grants has grown, making it a little less competitive to get a grant of your own.

Cons of Small Business Grants

  • The application process can be taxing. Small business grants are challenging to obtain, as there are specific requirements your business 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 business 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 business meets the qualifications and fulfills all the requirements. The greatest appeal of grants is that business owners 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 business.

For example, if your grant is to fund technological research, you cannot use the grant money to supplement payroll or any other business 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 business 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 small business 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 small 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. State small business grants range from grants for innovation-focused businesses to grants for rural-based businesses. 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 business 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 small business grants that support specific communities. Small businesses 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. Small business grants make securing funding for women-owned businesses easier. From grants for female-owned small businesses that contribute to positive change to jewelry makers, there are a variety of small business 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 business 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 business’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 business has. Typically, small business grants pertain to businesses with few employees.
  • Your monthly and yearly revenue. If your business 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 businesses already in operation.

Alternatives to Small Business Grants

If your business 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 business. From loans to building your own savings account or even funding your business yourself — the possibilities for bankrolling your small business 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 small business loan can help resolve cash flow problems, increase the value of your business, and encourage business growth.

Business Line of Credit

A business line of credit is a fixed amount of money allotted to a business that is typically used for smaller business 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 small businesses. 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 business 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

How do business grants work?

Business grants are essentially free money for your business. 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.

How can I get a grant to start a business?

Start by doing your research. Finding a business grant that your business 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.

How do I qualify for a small business grant?

Every small business grant is different and qualifications will vary from grant to grant. However, businesses that specialize in education, medical research, or technology are likely to find grants to qualify for as well as minority, women, or veteran-owned businesses.

What is the easiest grant to get?

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.

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