Government grants for small businesses exist, but the opportunity to get one is limited to a narrow filed of candidates. Today we will go over what you need to know about government grants for small businesses, who is eligible to receive them, and how to get a business grant for your business.
What Grants Are Available?
Let’s start by establishing what the government does not provide grants for before we dive into the type of government grants available to small businesses.
The federal government does not provide grants for the following activities:
- Starting and expanding a business
- Paying off debt
- Covering operational expenses
The federal government does award grants to small businesses in certain fields and industries such as scientific, environmental, and medical research). One of the lucrative sources of federal grants for high-tech startups or high-growth firms is the Small Business Innovation Research (SBIR) program.
The reason why federal grants are off-limits to small businesses is that they are funded by our tax dollars and appropriated through Congress and The White House. Fund allocations are tightly controlled and only awarded to business endeavors that are closely tied to the agenda of a particular government agency like the U.S Department of Energy.
How to Find and Apply for Small Business Grants
If you think your business qualifies for a grant, the resources below can help you with your search.
If you go to Grants.gov you will find over one thousand different grant programs
State and local grants
Contact your state economic development agency for information about discretionary incentive grants.
Corporate and nonprofit grants
Small business grants are also available from select nonprofits and corporations.
SBIR grants for R&D businesses
If your small business is engaged in research and development (R&D), you might be eligible for a Small Business Innovation Research (SBIR) grant. SBIR is a federal program, overseen by the U.S. Small Business Administration (SBA), that awards grants and government contracts to stimulate high-tech innovation and grow the economy by supporting the R&D necessary to develop and commercialize innovative technological products.
To be eligible for an SBIR grant, your business needs to be more than 50 percent American-owned, located in the United States, and have less than 500 employees – securing a grant requires some effort. You need to prove that your efforts are aligned with federal R&D goals by searching advertised agency solicitation the SBIR website. Then you will submit a proposal that outlines the merits and benefits of your venture. If you are successful, you will then enter a phased R&D process.
Cons of Small Business Grants
Unfortunately, there are a number of cons associated with small business grants.
- Grant applications are time consuming
- You need to justify your purpose
- Waiting for grant approval takes some time
- Grant approvals are tough because they are competitive
- Small business grant eligibility requirements can be strict
- A small business grant involves regular updates
- Small business grant contingencies
- There are strict rules when it comes to federal and state grants
The Bottom Line
If you need capital, do not waste your time with “free government money” ads and use your energy to investigate other sources of financing instead. If you do not qualify for a bank loan, consider an SBA loan which can be easier to secure than a standard bank loan. An SBA loan is funded with money that comes indirectly from the SBA—first the SBA makes a guaranteed loan to your bank, which then makes a small business loan to you, the business owner. This approach allows the bank to take on a little more risk than they otherwise might be able to afford.
Other financing options include borrowing from friends and family, crowdfunding, personal funds, angel investment, venture capital and more. There is the right type of financing out there for you, you just have to look for it.