In order to understand what makes small business grants so special, let’s first look at some other popular methods for funding your business. Most entrepreneurs begin by investing a substantial portion of their own money into the business. Nobody likes watching their savings account dwindle, but you’ve got to start somewhere. And using your personal funds is required to qualify for financing, as most lenders want to know that you’ve got skin in the game before risking theirs on your behalf.
Speaking of risk, you can always ask friends and family for money. If you have wealthy relatives known for their generosity, this approach might work. But it’s common for issues to arise when borrowing from loved ones, including the prospect of people actively avoiding you at family reunions (of course, you might consider this a silver lining).
“The reality is nobody likes being asked to part with their money,” says small business expert Geoff Williams. “And when you make an arrangement to borrow cash from a friend or family member, you put yourself at risk of creating a strain in your relationship if expectations aren’t met, your repayment plan is vague, or you fail to make a payment on time. But as challenging as it can be to ask someone like a parent or pal for money, it can be an even greater struggle to pay him or her back, depending on your financial situation.”
Finally, you might look at getting money from angel investors. This option is tempting because the funds don’t need to be repaid if your business fails. But there can be complications tied to the fact that angel investors have a stake in your business and may want to be part of the decision-making process. In some cases, they might even try to take a seat at the head of the table.
The Magic of Small Business Grants
How do you avoid problems like angry relatives or overzealous angel investors? Well, business grants offer many of the benefits you’d get with those money sources, but without the negatives. When done right, business grants come as close as possible to allowing you to have your cake and eat it too.
So what is a small business grant, exactly? It’s money awarded to your business by a government agency, nonprofit organization, corporation, or other entity. The biggest advantage of this money is that it never needs to be repaid.
Another amazing aspect of small business grants is the money is often earmarked for those who need it most. This means that traditionally excluded business owners, such as women, people of color, and military veterans, can be prime candidates.
You might be wondering why anyone would give out free money to small businesses. It sounds incredibly generous, but things like this usually come with a catch. In most cases, the entity providing the grant wants to support businesses that align with their goals.
For example, let’s say a federal agency was trying to help farmers use more technology to grow their crops. To promote the program and also facilitate the development of better technology, that agency might offer $500,000 grants to American businesses that are actively working on agricultural technology projects. As long as the money from the grant went toward these related projects, it’s almost like a gift from the agency to reward the complementary work being carried out by the business.
Another example might involve a nonprofit organization that’s committed to helping more women pursue their entrepreneurial dreams. This organization could build upon this mission by offering $35,000 grants to small businesses that are owned by women and can demonstrate that there is no gender wage gap for their employees.
“A grant is money that’s given to a business for a specific purpose,” explains The Balance Small Business. “Whereas a lender wants you to demonstrate your ability to repay the loan, an agency that offers grants wants to see that your business aligns with its mission or a specific initiative. Businesses can qualify for grants for many reasons, whether it’s because the business supports a specific government initiative or its ownership meets certain qualifications (women and minorities, for example). There are a variety of government, nonprofit, and private entities that fund grants for a wide array of projects and programs.”
Given this symbiotic relationship between the grant giver and the recipient, you could safely say that while the money is free, it’s not really free. There will always be strict qualifications and expectations for anyone hoping to obtain a grant.
Preparing Your Business to Compete for Grants
Imagine that you are at your local elementary school on a particularly hot day. Hundreds of kids skitter around the playground, having fun while trying to stay in the shaded areas. Suddenly, a lunch worker comes out to the playground with a cooler full of popsicles.
What would happen? Pandemonium, that’s what. If there were 100 popsicles in the cooler and 500 kids on the playground, expect fierce competition for those frozen treats. Most of the popsicles would probably go to the kids closest to the cooler and the rest to those aggressive enough to make their way through the crowd.
Getting a grant for your small business isn’t so different. There are more than 30 million small businesses in America, and it’s a safe bet that 99.99% of them could use extra money to help with their operating expenses. So if a federal agency or corporation announces that they’re giving away lucrative grants, you can expect a surge of applications.
“Grants for small business can be hot commodities,” says grant guru Kate Harrison. “Even if you do your research, find available grants, and decide to apply, you might find that the application process isn’t a good fit for you or your business. If you’re feeling intimidated by the application, consider bringing in another party to help you fill it out. Grant-writing classes, conferences, and workshops may be able to help, too. Another option might be to hire an experienced grant writer to develop your startup business grant proposals for you. No matter how you approach the process, the rewards are there for small business owners who put in the time and energy to submit a complete and compelling grant proposal.”
Successful grant applications usually come down to precision. The small business owner did their due diligence and found a grant they were uniquely qualified for. Then they carefully filled out the application and included all the details the grant provider was looking for.
This means you do not want to cast a wide net when searching for small business grants. Continuing with the fishing metaphors, what you’d want to do is sight fish, which is when an angler carefully scans the water until spotting a fish to target. Then, the angler casts directly to the fish with a lure specifically chosen for that species in that body of water at that time of day.
Just as anglers keep a tackle box full of fishing lures, you should have a collection of proven assets ready for grant submissions. First and foremost, you need to have a rock-solid business plan. This is because nearly all the other required assets will be tied in one way or another to the details and goals outlined in your plan.
If you don’t currently have a business plan, there’s still time to right that wrong. Even if you already have one, this is a great chance to revisit it and see where improvements can be made. Carve out some quality time in the coming weeks to create this map for where you want your business to go and how you think you can get it there.
It’s often helpful to ask questions about your business, then let the answers form the foundation of your plan. For example:
- What is your mission statement?
- What’s your primary business objective?
- What are your key strategies?
- What are your financial needs?
- What are your financial projections?
- What have you learned through competitor analysis?
- What have you learned through market analysis?
- What have you learned through industry analysis?
Every detail that goes into your plan has the potential to become a guiding star as you seek to improve your business. And when you approach a grant provider, these details are written proof of your organization, purpose, and strategy.
Grant applications will often ask for other details such as how long you’ve been in business, where your revenue stands, what your Employee Identification Number (EIN) is, and how you intend to spend the grant money if you receive it. Any business that has a great business plan will already have these details worked out, as they are interconnected.
Be sure to carefully review any application you are thinking about filling out. Look for anything that might exclude your business, as you don’t want to waste time applying for grants you could never acquire. Likewise, watch for the unique instructions the grant provider has included. If you fail to include a required document, it’s likely that your application will be fast-tracked to the garbage can.
Finding the Best Small Business Grants
As mentioned earlier, the competition can be fierce for small business grants. There’s only so much free money available in America, so be prepared to put the work in if you hope to find a relevant grant and then successfully apply for it.
The first place any business grant seeker should go is Grants.gov. This site is the sorting house for the hundreds of federal grant programs provided by various administrations and agencies. Search by industry or other factors to see if you’re eligible for any of these grants. If you’re in the technology industry, you’ll quickly notice that there are more potential opportunities for your business than those in other industries.
Once you’ve canvassed Grants.gov for ideas, you can move into the private sector. At this point, it’s often helpful to connect with the experts from your area’s Small Business Development Center or SCORE office. They often have resources to help you identify possible grants and then submit a strong application.
Here’s a list of some interesting grants from a variety of sources that you might want to consider. This list is by no means comprehensive but is intended to give you an idea of the range of possibilities that exist in the federal, corporate, and nonprofit worlds.
- The National Association for the Self-Employed (NASE) Growth Grants Program: These grants are on the smaller side, but no entrepreneur has ever said no to $4,000.
- Small Business Innovation Research (SBIR) Grants: Only a small percentage of small businesses meet the requirements for these highly technical grants from the Department of Energy, but the amounts can reach up to $1 million.
- Small Business Technology Transfer (SBTT): Another lucrative grant provided on the federal level for those in very specific fields.
- Rural Business Development Grants: Does your business operate from a rural area? If so, this program could provide some funding.
- Minority Business Development Agency (MBDA): As the name implies, this program is intended to assist minority entrepreneurs. The grants can reach up to $300,000.
- FedEx Small Business Grant Contest: Here’s a great option for small business owners hoping to make an impact in their communities. The grants are worth $25,000 each.
- Community Programs to Improve Minority Health Grant Program: These grants are intended for businesses aligning with key healthcare goals. If you qualify, you can receive up to $500,000.
- National Minority Supplier Development Council: If your business has been certified as a minority-owned company, you can apply for these popular grants.
- StreetShares Foundation Veteran Business Grant: If you (or your spouse) are active duty or a veteran, you could qualify for these $5,000 grants. The dollar amount isn’t huge, but can still provide a nice boost for your business.
- IdeaCafe Business Grant: Whether you currently own a business or are still trying to get your big idea off the ground, these $1,000 grants provide a spark plug.
- Bill and Melinda Gates Foundation Grand Global Challenges: Innovative companies that make an impact around the world should consider these lucrative grants.
- Department of Justice Grants: A wide array of grants is available from the Department of Justice. As long as your business contributes to public safety or law enforcement, you might want to check them out.
- Eileen Fisher Grant Program: These grants are intended to help female entrepreneurs reach new heights. As many as 10 businesses are approved for the funding each year.
- The Amber Grant Program: While these $500 grants are on the smaller side, they can open up additional opportunities for your business. For example, those who qualify are considered for additional funding at the end of the year.
- InnovateHER Women Business Challenge: There’s a higher-than-average number of hoops to jump through if you want to compete for one of these grants, but they can reach up to $40,000.
- The Save Small Business Fund: Provided by the US Chamber of Commerce Foundation, these small grants are set aside for businesses with 20 or fewer employees.
- National Institutes of Health Grants: If your business is doing innovative things in healthcare, you might qualify for some of this federal funding.
- Environmental Protection Agency Grants: As you might guess from the sponsoring agency, these grants are set aside for businesses that provide solutions to protect the environment.
- Department of Transportation Grants: Perhaps your business is more focused on transportation solutions. If it involves planes, trains, or automobiles, you might want to check out these grants.
- National Oceanic and Atmospheric Administration (NOAA) Grants: For businesses that provide products or services aimed at helping maintain ocean and coastline health, these grants could be a possible option.
- Distance Learning and Telemedicine Grant: Rural America needs better connections to health and education. So if your business has something to offer in these fields, perhaps the Department of Agriculture has something to offer you.
- Visa Everywhere Initiative: The competition is fierce for these $50,000 grants, but you should definitely check it out if you feel that you have a particularly innovative solution to offer America.
This list only represents the tip of the iceberg when it comes to grants available to your small business. You’ll need to strategically search through the options to find the best matches so you put your business in the best position for success.
If you feel overwhelmed by the immensity of the possibilities or the intensity of the competition, reach out to a trusted mentor who can guide you to the best options. Seeking grants is like riding a bike. There’s a learning curve at the beginning, but after you’ve gotten a feel for it, you’ll be able to navigate new terrain with more and more confidence. And the payoff can be phenomenal.