Small Business Grants | Nav

What is a Small Business Grant?

Susan Guillory

A grant is financial assistance that is given to a person, business, nonprofit, or corporation from federal, state, county, or local governments, or private businesses or corporations. There are a number of companies, nonprofits, and government agencies providing essentially funding to small business owners in the form of a small business grant. And the best part? Grants do not require repayment of any kind.

Grants can be formed to target businesses based on a variety of factors, including minority-owned businesses, specific for-profit businesses as well as non-profit organizations, veteran-owned businesses, grants for women entrepreneurs, and more.

You don’t have to make your pitch on “Shark Tank,” refinance your home, or take out small business loans to take the next step in your entrepreneurial journey — business grants may help you get there, if you know where to look and how to apply.

We’ve pulled together numerous resources for business owners searching for small business grant opportunities. The majority of these have broad grant application requirements, meaning many businesses qualify.

Keep in mind that this can be a double-edged sword for applicants, though — you can apply for a lot more business grants if the qualifications are broad, but that means more competition for the grant. Often, you can find more success by finding niche grants for your industry, or based on your ownership structure and makeup.

In that spirit, we’ve provided some how-to advice all business owners can use to get your grant entries and/or grant proposals together, along with lists of small business grant programs, split into some of the most-searched-for categories.

Types of Small Business Grants

There are several types of grants, and you may only be eligible for certain ones. Grants generally come from the following sources:

• Federal state or local governments
• Foundations
• Businesses

Government grants are often the most involved, while grants made by businesses may include a “competition” aspect.

Above, we’ve rounded up examples of some popular grants in these categories. However, don’t limit your search to just these grants. We’ve also included several research tools you can use to find grants that may be a fit for your business.

How to Find a Grant for a Small Business

A quick Google search will pull up millions of results for business grants. So many possibilities are out there that it can seem impossible to narrow down the prospects. But there are a few resources that can not only help you find the right grants for your business, but even assist in the application process, and help you identify grant opportunities that can’t be missed.

OpenGrants

OpenGrants offers the most comprehensive data set of public and private grant funding in the United States. The site offers both free and paid membership options. With the free membership, you can search the grants database, hire grant writers (for a fee), and get access to resources and guides.

With the paid membership, you can flag grants, get email alerts when new grants are added, take notes on grants, use the power search feature, export results, and get personalized matching.

Grants.gov

Free money from the government — who wouldn’t want a piece of that? Grants.gov is the federal government agency’s landing page for all federal government grants across agencies. It’s a great resource for finding grant opportunities, but small businesses may be disappointed to find that many of the grants are closed to them. 

The site includes grants for school systems, local governments, individuals, and nonprofits as well, so you have to sift through to find ones that are the right fit for you. Also, the federal grants available to small businesses have specific requirements when it comes to business size. (You can read more about how the federal government determines which businesses qualify as “small” businesses in this article.)

If it seems like receiving a business grant, specifically a government-funded one, is tricky, that’s because it can be. Here are some general guidelines and requirements that the federal government uses to determine business grant eligibility requirements:

• Grants are not provided for starting a business.
• Grant money is not made available for a business to pay off debt or to cover operating expenses.
• State and local grants that are provided by the federal government may be awarded to organizations that assist with economic development.

GrantWatch

GrantWatch is another database of grants of every kind, though it’s a subscription-based service you will need to pay for. The site has a wide variety of grants offered by federal, state, and local governments, as well as foundations and corporations. The site is constantly being updated, and grants that have closed are archived. 

You can filter the more than 25,000 grants by category to narrow down the ones targeting small businesses like yours.

Your Local Librarian

Among the many, many things local libraries provide for free or at a low cost to business owners is help finding grants. Just ask your librarian. These men and women are trained researchers with access to hundreds of databases.

Libraries often work in conjunction with local Chambers of Commerce or business organizations already and may be able to connect you with experts who know the local lay of the land and help you find business grants specific to your community.

Other Resources That Can Help Your Small Business

If you’re seeing grant funding to start or grow your business, there’s another step you should consider: get help from local agencies. The following organizations can provide free help for your business, and you can find them through SBA.gov or use the links below:

Small Business Development Centers

Once you’ve exhausted your searches for grants from federal agencies, the next stop on your list should be local and state business grants. You may be able to hit paydirt and find some of these on your own, but there’s a free, local resource that may help.

Small Business Development Centers are a business owner’s best friend. Local, regional, state, and national offices mentor small business owners and help them understand business financing options, craft marketing strategies, and connect to other local small business owners (and much more — these guys do it all). 

One thing they can help with, for example, is creating a business plan that can help you create an exciting vision for your company, and a compelling pitch on how you’ll use the grant money. They may also be able to help you navigate federal small business grants.

One thing they can help with is navigating the grant process. Very few people have as much visibility as SBDC advisors do on the local business grant scene. It’s the one appointment you can’t afford not to make when searching for small business grants.

SCORE.org

SCORE is a nonprofit organization backed by the Small Business Administration that promotes free entrepreneurship training, tools and mentorship for American small business owners. Like SBDCs, SCORE is a free resource for entrepreneurs looking for help or expertise and they have many local experts that you can connect with. A SCORE mentor may help you identify local grant opportunities, or review your pitch to help you make it as compelling as possible.

State Agencies

Many states also offer free business resources to help business owners in their state. Check your state’s Department of Corporations website (or similar website). Get on their mailing list if possible, as they may send out emails alerting you to small business grants in your state.

How to Apply for a Small Business Grant

Work smart AND hard. Instead of filling out an individual grant application, do what every job applicant does and create a “resume” for your business that outlines your answers to the common questions business grant-givers ask of their applicants. While grants are technically free money, that doesn’t mean they come without hard work on your part. 

Some applications will vary based on what’s required. For example, a local government grant will likely require an explanation of how your business’s growth and development will benefit local commerce directly, while a grant from a private company like FedEx may require a persuasive video.

Here are a few common details you may need to provide when applying for a business grant:

1. Time in business
2. Number of employees
3. Monthly or annual revenue
4. How the funds will be used
5. Your business’s “elevator pitch”
6. Your Employer Identification Number (EIN)
7. Your social media handles (LinkedIn, Facebook, Twitter, Instagram, etc.)
8. A photo of you (and, if applicable, your partners or offices). Tip: A professional photo can go a long way, especially for companies looking to use your image on their site when announcing awards.

A business plan. You should already have one, but if you don’t, talking to an SBDC adviser or your accountant can help you figure out the numbers, projections, and stats that reflect the current health of your business and where you can go down the road.

Business Grant vs. Business Loan: What’s the Difference?

While both help you get money for your business, grants and business loans for small businesses are different beasts. The main difference between a grant and a loan is whether or not they require repayment. Loans require you to repay the money you borrow; a grant does not. Grants can be awarded by government departments, trusts, or corporations and given to individuals, businesses, educational institutions, or non-profits.

Grants can be notoriously difficult to get, so if you apply for funding and are rejected, consider other financing, including business credit cards.

Here are other things to know about the differences between grants and loans.

1. Grants Are Taxable Income. The IRS generally considers business grants as income for tax purposes. How your business is structured and how you report income to the IRS will determine what impact this will have on you come tax time, but generally, expect that a chunk of any grant money will go to Uncle Sam. You can head off this potential business grant downside by planning ahead and asking your accountant or tax professional to factor any grant money you’re awarded into your quarterly estimated payments (if applicable) or to help you estimate owed taxes and set aside those funds so you don’t have a larger-than-expected bill come tax time. Loans, however, are not considered income in the eyes of the IRS.
2. You Pay Interest on Loans. Grants are free money for all intents and purposes. Even a low-interest loan, however, comes at a cost. Depending on the type of business financing, you could face APRs anywhere from 5% to 150%, depending on your personal and business credit scores, cash flow, years in business, collateral, and other factors. 
3. Grants Won’t Help You Build Business Credit. It’s one of the things that frustrates borrowers of all sorts — it takes credit to build credit. Building a business credit history with the major commercial credit reporting bureaus (most notably, Experian and Dun & Bradstreet), requires a tradeline of some sort. While a business grant is nothing to sneeze at — it’s free money, after all — once it runs out, you still may need additional funding to grow and expand your business. And a business grant isn’t reported to any personal or business credit reporting agencies.
4. Grants Are a Direct Competition. Loans Aren’t. There’s no guarantee you’ll win a business grant or get approved for a business loan. But loans aren’t an either/or scenario where you’re competing directly with another business for the same pot of money. If you can prove to a business lender that you’re credit-worthy and your business financials are sound, you’re likely to get approved for a business loan, whether or not another business in the community applies. Business grants, however, tend to have one or a handful of winners — supplies are limited. You have to not only be a great business, but you also need to be the best business per the grant parameters. That’s not an easy feat for many grants where application requirements are broad.

Loans Can Come With Consequences. If you can’t make a payment or you default on your loan, you’re going to face consequences. What those consequences are depends on the loan type and what you put on the line to get approved, but can include repossessed equipment, a business lien or UCC filing, a damaged personal or business credit score, or bankruptcy. Generally with a business grant, if you use the money unwisely and spend it on something your business wants but maybe doesn’t need, your biggest risk is opportunity cost. (However, keep in mind that larger grants— and especially federal grants—  may have specific reporting requirements, and they may release funds only after certain milestones are met.)

Frequently Asked Questions

Are COVID-19 Business Relief Grants Still Available?

The two main coronavirus relief programs: Paycheck Protection Program loans (PPP loans) and the COVID Economic Injury Disaster Loan (EIDL) (including Targeted EIDL Grants) – are no longer accepting applications. You may still be able to find a few state or local programs that can help local businesses impacted by the pandemic, but for the most part, COVID-19 relief grants have ended.

How Do I Apply for a Small Business Grant?

Each grant will outline the steps for applying. You’ll need to provide details about your business, and you may be asked to write a letter or essay on how you plan to use the grant funds. Some grants, like the one offered by FedEx, require you to record a video elevator pitch.

How Do I Qualify for a Small Business Grant?

Each grant has specific qualifications you’ll need to meet in order to apply. It’s important to review these first so you don’t waste your time (and the judges’ time) applying for grants you aren’t eligible for.

Some may require you to be in a certain industry. Others may require you to be in business a certain amount of time or be generating a certain revenue. You may have restrictions on how you use the funds.

Are There Any Downsides to Business Grants?

A variety of factors make many business owners skeptical of the “free” money that business grants offer. While every grant has a different application period, rules, terms, and conditions, here are some potential downsides you should keep in mind when applying.

As mentioned above, business grant funds are taxable income for IRS purposes. The funds will still be free money for your business, but you will need to make sure you don’t spend the entire payout without planning for the added income in your tax bill.

Business grant applications take time. You’re already a time-crunched business owner wearing a million hats, do you really have time to apply for every business grant opportunity you come across? It’s a valid complaint about business grants. The likelihood of winning the grant can be small depending on the size of the contest, so you have to make your own cost/benefit analysis to figure out if your most precious asset — time — is worth it.

Small business grants may require campaigning. Many business grants require a social media component, where you campaign or share something publicly about your grant application. That’s not necessarily a negative if you have an active and vocal social media following, but campaigning does take additional time and some business owners may understandably not want to be as public about their search for money.

Any way you look at it, small business grants are a good thing. It’s worth your time and energy to explore which ones your business is eligible to apply for because money you don’t have to pay back is money that helps your business grow.

Alternatives to Small Business Grants

If you don’t have the patience to apply for a small business grant and wait to see if you’ve been awarded it, look to other options to get the financing you need.

There are plenty of small business loans available, no matter what your credit profile. If your business is established and you have excellent credit, you might qualify for a bank or SBA loan with lower interest rates. If you want access to some cash now and more later, look for a line of credit.

If you’re working to build your credit, you may be able to get a merchant cash advance or invoice financing. And if you’re just looking for a way to purchase what your business needs, there are plenty of small business credit cards available to you.