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Business grants offer essentially free money, so they can help establish and grow your operation without needing to make repayments. You can also use grants to supplement other traditional methods of funding a business.
There are many factors to consider when pursuing a business grant for your operation:
What is a small business grant?
A business grant is money that is given to a person, business, or corporation by a federal, state, county, or local government. Private businesses or corporations may also distribute financial grants, as several did during the COVID-19 pandemic.
Grants do not require repayment of any kind. They are an attractive option for entrepreneurs and small or online businesses with little cash available for growth or expansion.
There are grants available for a range of small business owners, including women, minorities, veterans, and disabled Americans.
Typically, a grant becomes available when a government agency, non-profit, or private business chooses to set aside grant money for an area of interest, including:
- Grants for minority-owned businesses
- Grants for young entrepreneurs
- Grants for startups
- Grants for veterans
- Grants for women entrepreneurs
The pros of small business grants
Business grants offer several key advantages for entepreneurs, especially ones that are trying to get a business off the ground:
They don't need to be repaid
The main advantage of using small business grants is that you don't need to repay them. This is welcome news for many small businesses that may have financing difficulties that make it challenging for them to repay a traditional business loan.
They are relatively easy to find online
Doing some research upfront will help you target grants that you are most likely to win and avoid ones that you’re not qualified for. There are several free resources that can point you in the right direction of the many grants that are available:
- The Small Business Administration (SBA) offers a limited number of grants to eligible community organizations for promoting entrepreneurship and to certain businesses in specific industries. However, the SBA does not offer grants for starting or expanding a business.
- Grants.gov gives a vast amount of information on federal small business grants. This one-stop shop for federal-grant seekers offers you access to more than 1,000 grant programs that award more than $500 billion annually. Intended to make it easier to find and apply for federal grants, the site offers a simplified process for submitting electronic applications. It also has a dedicated customer support team and an app.
- Small Business Innovation Research Program (SBIR) is a federal funding program coordinated by the SBA for small businesses focusing on federal innovation. Grantees must meet requirements including U.S. citizenship and number of employees.
- Small Business Technology Transfer Program (STTR) focuses on research and development and bridging the gap between the performance of basic science and commercializing resulting innovations. Its goal is to transfer the technology developed by research institutions through small businesses.
- The National Institutes of Health Research Grant Programs offer independent scientific research grants, including the very popular R-series grants, through the National Institute of Allergy and Infectious Diseases and other institutes and centers.
- The U.S. Economic Development Administration (EDA), within the U.S. Department of Commerce, helps businesses secure grants and other financing through its regional offices around the country.
- The Minority Business Development Agency connects certified Minority Business Enterprises (MBEs) with business consulting and financial assistance through its Minority Business Centers.
You may be able to quality for multiple grants
In general, if you discover that you are qualified for one grant program, you might find others for which you also may qualify.
The cons of small business grants
Although the idea of getting free money to fund your business sounds very appealing, be aware that small business grants can have significant drawbacks.
Small business grant eligibility can be strict
Most small business grants have rigorous eligibility requirements, and it could take time to thoroughly comb through them. If you overlook them and fail to meet any of the requirements, you may not be eligible for a grant you’ve spent time applying for.
For example, you may have spent the effort to get certified as a minority-owned business but you still might not qualify for certain grants because they require that you operate in a certain industry or have additional requirements.
There are strict rules for federal and state grants
A state or federal grant is often funded with taxpayer dollars and therefore may have very stringent terms. Unlike traditional loans, these grants for small businesses are usually not issued for starting a business, paying off debt, or covering basic operating expenses such as payroll costs.
A small business grant application is time-consuming
There may be hidden drawbacks associated with grants — including how much time is needed to apply. Typically, grant applications require a lot of paperwork that could take away from the hours you have available for running your business.
In addition to the application, you may also have to provide additional documentation such as the demographics of your market, details about your product or service, and your specific reasons for applying for the grant.
As a small business owner, you may not have the time to complete the paperwork required for one grant application, let alone multiple ones, or the funds to hire a grant writer.
Waiting for a grant approval adds time
Small business owners who apply for grants will likely need patience. After all the time you spend on the application process, be prepared to wait even longer for the response. It can take weeks and sometimes months to find out whether you’ve been approved for a small business grant. This may add to your stress levels, especially if you need the funds quickly.
The competition for grants is fierce
There are hundreds of thousands of small and online businesses trying to secure free grant money just like you. This means the competition can be fierce.
Know the strengths of your business and do some research on the types of grants for which you may qualify. This could help position you and your business well during the application process.
A small business grant involves regular updates
Once you’re approved for a grant, you may be subject to periodic progress checkups on your business. During check-ins, which might be held monthly or quarterly, you may be required to provide proof of such things as:
- Marketing
- Publicity with local or regional news
- Other forms of
- The steps you’ve accomplished toward goals outlined in the grant
How to get a grant for a small business
When you’ve identified grants that are a good fit for your business, the next step is to apply. Every grant application is unique, but common requirements include:
- Meeting application deadlines
- Registering on an online platform
- Supplying detailed information about your business finances and plans
- Explaining how you will use the funds
- Describing what sets you apart from other applicants
- Keeping records of how you use the grant funds after you receive them
Do you need a grant writer?
You may be asking, can anyone write a grant proposal? The answer is yes. After all, small business owners are experts on the businesses they run. Plus, you could try to fill in any gaps in your grant-writing knowledge by using online resources. And you may be able to repurpose a lot of the documentation that comes out of the process for future grant applications.
But because tackling grant applications can be a very time-consuming process, you may benefit from hiring a professional grant writer. Weigh the pros and cons of your individual circumstances and each grant you are considering before making a final decision.
Alternatives to small business grants
Grants may be beneficial, but they may not be the easiest or quickest way to improve your cash flow.
If you do not have the time or resources to spend on the grant-writing process, consider applying for a business line of credit or a small business loan.
Learn more about the differences between grants and loans.
The material made available for you on this website is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.
