A business grant is a form of financial assistance given to a company by a government agency or private organization for a specific purpose. Grants, unlike loans, do not need to be paid back. Despite this benefit, finding a grant that your business qualifies for and submitting a complete application can be challenging. However, if your business could benefit from additional funds without incurring debt, a grant can be a great way to receive a capital infusion.
Types of Grants Available to Small Businesses
Receiving money for your business that you do not have to pay back is a very appealing prospect. Of course, with free money on the line, you must compete with many other businesses for a slice of the same pie. Both federal and state governments provide grants to small businesses. Private corporations and charitable foundations have grant programs as well.
To narrow down the competition and increase your odds of landing a small business grant, familiarize yourself with the basic types of grants that are available.
Federal Grants
The federal government provides financial assistance to businesses and individuals in a variety of ways. One of those ways is through federal grants. Like most things associated with the federal government, federal grants must comply with numerous regulations, and the paper trail is daunting.
By law, federal grant funds are available to the public using a Funding Opportunity Announcement (FOA). When the government announces a grant, it must include key information such as the purpose and goal of the program, the due date for grant applications, and the type of award. As the US Office of Justice Programs explains, funding programs have several different structures, including discretionary grants and cooperative agreements.
Because there is no such thing as a free lunch, federal grant recipients should expect that even if they succeed in winning a government grant, their performance will be audited during the Post Award Phase. An audit may be a small price to pay for government grant money, however. Businesses that do not mind the added oversight can explore federal grant opportunities from the following sources:
- Small Business Administration: The Small Business Administration (SBA) has two grant programs that are geared toward scientific research with the potential for commercialization: the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. These programs are searchable on the government’s SBIR/STTR website. The SBA also offers grants to community organizations promoting entrepreneurship.
- Grants.gov: Grants.gov is your one-stop access point to federal grant-making agencies, including the US Department of Agriculture, Department of Commerce, Department of Defense, Department of Education, Department of Energy, and Department of Health and Human Services. Create an account at Grants.gov to search for grant opportunities and filter by funding agency, business category, eligibility criteria, and funding instrument.
State and Local Grants
In addition to federal government grants, grants are available at the state and municipal levels. State and local business grants might give you a better shot at obtaining funds because you will not have to compete with businesses from across the country, as with federal business grants.
The following sources (by no means exhaustive) can help kickstart your search for local business funding:
- State Business Incentive Database: This database, a product of the Council for Community and Economic Research, lists thousands of incentive programs across the United States that small businesses can take advantage of. These incentive programs include not only grants but also tax credits, loans, and tax exemptions. Click on the state where your business is located to view a list of all state programs. You will need to create an account to view the results.
- Small Business Development Center: The Small Business Development Center is the most comprehensive small business assistance network in the United States. With approximately 1,000 local centers across the country, there is bound to be a center near you that can help connect you with organizations offering grants and other financing sources.
- Economic Development Administration: While the Economic Development Administration (EDA) pursues a federal economic development agenda, it works directly with communities and regions, with a focus on local business conditions and needs. The EDA has grant investments related to planning, technical assistance, and infrastructure construction. Search for regional office contacts and other resources on the EDA’s website.
Private Company Grants
Many big companies want to give back to the business community by supporting smaller companies with grants. The following are some of the better-known corporate, small business grants:
- The FedEx Small Business Grant Contest awards a grand prize of $50,000 to three winners and a first-place prize of $20,000 to seven winners. The 2022 contest opens February 10 and runs until February 28.
- The Visa Everywhere Initiative is specific to payments and commerce challenges, but over the years has raised more than $16 billion for thousands of startups. Applications for the North America regional competition are being accepted until March 31, 2022.
- American Express, in partnership with Main Street America, runs its Inclusive Backing program on an ongoing basis. The first grant cycle awarded more than 250 grants of over $5,000 each to underrepresented small business owners disproportionately affected by the pandemic. The next grant cycle will be announced in early 2022, according to the Inclusive Backing site.
- The National Association for the Self-Employed (NASE) has awarded $1 million in grants since 2006. Business development grants from the NASE—only available to members—are worth up to $4,000. Applications are accepted on a quarterly basis and winners are chosen monthly. See past winners and learn more here.
- A small business grant from Nav, a company that matches businesses to financing, can give your business $5,000 (runner-up) or $10,000 (grand prize). The annual grant competition opens again in early March 2022. Previous winners include a vegan restaurant, a logistics company, an equine services company, a coffee shop, and a custom furniture manufacturer.
Applying for a Small Business Grant
Unlike a small business law, receiving a small business grant will not create burdensome debt. But as with applying for a loan, you can expect the grant application process to be burdensome. Application requirements vary, but in general, you should expect to submit financial documentation and answer questions related to why you need the grant money, how you plan to use it, and why your business is deserving of the funds.
For an idea of what it takes to apply for a federal grant, here are the steps required in an SBA grant application:
- Obtain a Data Universal Numbering System (DUNS) number.
- Register with the System for Award Management (SAM).
- Create a Grants.gov account and add a profile for your business.
- Create a cover letter for your application.
- Create a proposed plan for the grant that includes performance measures and outcomes (if the grant is approved, you will be required to report on performance measures, completed activities, and measurable results every quarter).
- Submit a technical proposal that details your management capabilities, key personnel, experience, financial assistance plan, and a discussion of the economic benefits your proposed business activities will bring.
- Provide budget information about your business.
- Obtain necessary letters from key stakeholders.
- List your facilities, board of directors, organization chart, contractual or consulting agreements, and position descriptions.
- Submit tax identification documentation, a cost policy statement, and an audit report.
Again, these are the requirements for just one loan program, but it should give you an idea of what is in store when applying for a small business grant. Applying for a private company grant contest could be far less burdensome than seeking a federal government grant, but be prepared ahead of time by gathering your organizational documents and financial records, such as your income statement, cash flow statement, balance sheet, projected financials, and due diligence disclosures (e.g., pending legal action). There are many different facets to obtaining a business grant. If you need assistance with the loan application process or finding a funding source, our attorneys are here for you. As partners in your small business, we succeed when you succeed. For help with a small business grant, reach out to our office and schedule an appointment.
