A small-business grant can help a new company get started or an established one grow. Both the government and private sector, as well as many nonprofits, offer grants to businesses. These grants are often highly specialized and very competitive, but knowing how the process works can greatly increase your odds of success. This guide explains the basics of what you need to know.
Key Takeaways
- Small-business grants, unlike loans, don’t have to be paid back.
- Grants can be available from the federal, state, and local governments.
- Some corporations and nonprofit organizations also sponsor business grants.
- Business grants can be highly competitive, so it’s important to pay attention to the eligibility criteria and to prepare a strong grant application.
- Many grants are very specific in their requirements, including the types of businesses and business owners who are eligible.
Understanding Business Grants
Unlike business loans, business grants are money that you never have to pay back. That doesn’t mean there are no strings attached. The grant provider may expect you to use the funds for a very specific, agreed-upon purpose. It may also expect you to provide regular reports on how the money is being spent and the progress that you’re making.
Types of Business Grants
Small business grants are available from a range of sources and for a variety of different purposes. These are the most common types and the kinds of businesses that can be eligible for them:
Federal Grants
Despite what you may have seen on late-night TV commercials or read elsewhere online, the U.S. government isn’t in the business of doling out “free money” to entrepreneurs, just for the asking. Anyone who tells you they can get you a federal grant, typically for an upfront fee, is most likely a con artist.
The government does offer business grants of various kinds through more than two dozen federal agencies, but typically with very strict requirements. A good starting point to learn about them and see which ones your business might qualify for is Grants.gov. Examples include:
U.S. Small Business Administration (SBA). Rather than supplying funding directly to small businesses, the SBA primarily provides grants to community and nonprofit organizations, which in turn offer counseling and training to small businesses. As the SBA notes on its website, it “does not provide grants for starting and expanding a business.”
However, there are a couple of exceptions for businesses that qualify, specifically the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Those two grant programs are intended to “encourage scientific research that helps meet federal
research and development objectives” and that, if successful, “have high potential for commercialization,” the SBA says. It refers to the two programs as “America’s Seed Fund” and explains how to apply for them on a dedicated website, SBIR.gov.
Beyond grants, the SBA is a major backer of loans for small businesses, which are likely to be much easier to qualify for.
U.S. Department of Health and Human Services (HHS). This department says it “distributes the largest amount of grant funding of any federal agency.” As with the SBA, most of that money goes to entities supporting businesses, such as states, territories, tribes, and community organizations, rather than directly to individual businesses.
So HHS funding may be available to you indirectly, through one of these intermediaries, if you qualify. In particular, the HHS Office of Small and Disadvantaged Business Utilization (OSDBU) oversees a series of grant programs aimed at supporting women-owned and service-disabled-veteran-owned businesses as well as “businesses owned by socially or economically disadvantaged people or entities.”
State Grants
As mentioned above, much of the federal government’s grant money is funneled through the states. For example, the SBA’s State Trade Expansion Program (STEP) provides funds to states and territories so they can provide grants and other forms of financial assistance to small businesses that want to export internationally.
Similarly, the U.S. Department of Agriculture’s Rural Business Development Grants program provides money to state and local governments and nonprofits that they can then disseminate to promote economic development and job creation in rural areas.
Many states also fund their own grant programs. To learn what’s available in your state, a good centralized resource is the Council for Community and Economic Research’s State Business Incentives Database, which is available online. It currently lists more than 500 grant programs across the U.S., along with loans, tax credits, and other funding possibilities. The SBA’s Small Business Development Center (SBDC) can also be of help; you can find the nearest one by entering your ZIP code on the SBDC web page.
Local Government Grants
In addition to the states, some local governments have their own grant programs. The City of Chicago, for example, has a Small Business Improvement Fund (SBIF) that provides grants that business owners can use for improvements and repairs to commercial properties in certain parts of the city.
Many city and county governments also offer low-interest loans to support local businesses. A good way to find out what might be available in your locale would be to contact its economic development (or similarly named) office.
Private Grants
Numerous corporations and nonprofit organizations also provide business grants. Here are just a handful of examples, in alphabetical order:
Amazon. Through its annual Amazon Business Small Business Grants, the online giant recently awarded grants of $15,000 to $25,000 to 15 small businesses.
FedEx. FedEx’s Small Business Grants Program awarded a $50,00 grand prize and nine $20,000 second prizes to 10 U.S. businesses this year. The website notes that in choosing its 2024 winners “We received thousands of incredible applications, but these ten businesses and their stories stood out”—an indication of how competitive many of these competitions for corporate cash can be.
The National Association for the Self-Employed. This nonprofit organization offers grants of up to $4,000 through its NASE Growth Grants Program. You need to be a member to apply.
Verizon. The telecommunications company offers $10,000 Small Business Digital Ready Grants for small businesses in a partnership with the nonprofit Local Initiatives Support Corporation.
Visa. Visa’s She’s Next program provides grants to Black women-owned businesses. Most recently it awarded $10,000 each to 60 such businesses in six U.S. cities.
To find more corporate and nonprofit grants, the SBA’s Small Business Development Center (SBDC) nearest you can be a good resource.
Eligibility Criteria
Many grants are extremely specific in their eligibility criteria, while others are open to a broader range of businesses.
In general, eligibility requirements may involve the type of business, the demographic profile of its owners, the location of the business, the size of the business, and whether it is a new start-up or an established enterprise with some years behind it. Most funders are very clear in spelling out their criteria, so it’s worth reading their instructions carefully.
As the Grants.gov website notes, “If you are not legally eligible for a specific funding opportunity, you would waste a lot of time and money completing the application process when you cannot actually receive the grant.”
How to Find Available Grants
The first step in obtaining a grant is to familiarize yourself with the kinds of grants that may be open to a business like yours and what their funders say they are currently looking for in terms of proposals.
Identify Grants That Suit Your Business
There are a number of resources you can consult to find grants you might be eligible for, including the online ones discussed in the next section. In addition, if you belong to a local business group, such as a Chamber of Commerce, or to a trade association for your particular industry, it may have resources, as well. Also, as mentioned earlier, the SBA’s Small Business Development Center (SBDC) that serves your area you can be a good resource.
Utilize Online Resources
Most of the information you’ll need to research grant possibilities is available online, although finding it can take some work.
Grants.gov is a good starting place for government-funded grants, with a Search Grants tool and links to specific agencies for more information. Bear in mind that, as the website points out, “Most of the funding opportunities on Grants.gov are for organizations, not individuals.” A related resource is the Assistance Listings page on SAM.gov, which also has a search tool.
Finding non-government grants can require more research. There are a number of commercial sites, such as GrantWatch.com, that provide grant listings for a fee, although Investopedia has not independently evaluated them. Again, a good (and free) place to start might be your SBA Small Business Development Center (SBDC), which you can look up online.
How to Apply Successfully for a Business Grant
Applying for a business grant is usually a straightforward process, although you’ll want to make sure you read the instructions carefully because most grants are extremely competitive and you don’t want to give the reviewers of your application an easy excuse to rule you out.
The Application Process
In general, applying for a grant entails these steps:
1. Obtain an application and read it carefully. In most cases you can download one online.
2. Fill it out completely. That includes providing any documentation they request (see next section). Again, don’t omit anything that would cause them to reject you on a technicality.
3. Submit it by the deadline. Many annual grant programs have relatively small windows during which they will accept applications. Others have rolling deadlines throughout the year.
For federal government grants, you can register on the Grants.gov and SAM.gov websites and submit your application online through their Workspace feature.
Documentation You May Need
This will vary according to the grant program, but it might typically include:
- Your business plan
- Your revenue history
- An organizational chart for your business
- Bank statements
- Tax returns
How to Write a Compelling Grant Proposal
Writing a grant proposal can be a job in itself. Professional grant writers do it for a living, often a very lucrative one. Hiring a pro is a possibility and could be money well spent, especially if you’ve never done this before. If you’re going it alone, here are a few tips.
First, make sure you understand the funder’s mission and tailor your pitch accordingly. This isn’t just about your needs but, more importantly, theirs.
If you’re including your business plan, make sure it is up to date and in keeping with the funder’s objectives. If not, revise it accordingly.
Be clear about how you would use the money if you’re awarded a grant. “The purpose of most grants is quite specific, so vague, unmeasurable goals slated to be met at some non-specific future date simply won’t cut it,” Dun & Bradstreet notes.
Structure your proposal following any guidelines the funder provides. As the U.S. Department of Health and Human Services advises in its tips for grant writers, proposal reviewers may be “accustomed to finding information in specific places,” so you’ll want to “present
information according to the prescribed format.” A relatively typical proposal might include a cover letter, table of contents, executive summary, problem statement, objectives, and budget.
Common Mistakes to Avoid
The most common mistake business owners make when applying for a grant is going for one that they have absolutely no chance of getting. If your business, or you personally, don’t meet the basic criteria, it will be a waste of time to apply.
Similarly, failing to strictly follow the application procedure or submitting an incomplete application can be fatal to your cause.
In addition, according to HHS, “Many applications fail because the reviewers cannot follow the thought process of the applicant or because parts of the application do not fit together.” So, in writing your proposal, make sure it is logically organized and that you’ve started your case as clearly as possible. Avoid jargon that reviewers might not be familiar with (or at least define it for them).
Other common mistakes can include not paying attention to the deadlines, rushing the process, or making inadvertent errors such as misspellings and typos. Even if you aren’t willing to spring for a professional grant writer, asking another person (ideally someone who knows something about your business) to read your proposal before you submit it is a good idea.
Tips for Increasing Your Chances of Success
While the odds against getting many grants can be long, you can sometimes increase your chances in several ways.
Build Relationships With Grant Providers
The best way to establish a relationship with grant providers is to show in your initial application that you understand their goals. Even if you don’t receive funding on your first try, they may remember you next time.
Seek Professional Help
Professional grant writers can help you, and you may want to hire one if your budget can handle the cost. But free help is also widely available. The SBA’s Small Business Development Centers (SBDCs), mentioned above, are one good source, as are community organizations supported by the SBA. In addition, there is a great deal of advice available online, including videos on Grants.gov and other sites, that can help guide you through the process.
Be Persistent and Follow Up
While it pays to be persistent, you also don’t want to come off like a pest. So the first rule is to pay close attention to any instructions the grant funder provides about how and when to follow up.
In general, if a funder hasn’t acknowledged the receipt of your application, it’s usually fine to inquire after about two weeks whether they got it. If your application is turned down, it’s also generally acceptable to politely ask for more information as to why. For example, you might ask whether it would be worth reapplying and, if so, what you could do differently to improve your chances. (You’ll not only be saving your time, but theirs.) In addition, it doesn’t hurt to ask if they know of other funders that might be a good fit for you.
Why Was Your Grant Application Rejected?
Grant applications are rejected for all kinds of reasons, most often because they didn’t meet the criteria that the funder was looking for. In addition, many grant programs receive far more proposals than they could ever fund, so even a perfectly suitable application might be turned down. If your application is unsuccessful, the funder may offer a reason. If it encourages you to try again, take that as a sign that you came very close.
Can Small Businesses Apply for Multiple Grants Simultaneously?
Yes, unless a particular funder specifies otherwise. An exception might be applying for more than one grant from a particular agency at the same time.
What Are the Tax Implications of Receiving a Business Grant?
If you’re running a for-profit business, the money you receive from a grant is generally considered taxable income that you’ll need to report. Nonprofits are a different story.
The Bottom Line
Business grants can provide funding that never has to be repaid. But they are often very specific in what they’re looking for and how they expect you to use the funds. So it’s important not to waste your time applying for grants that simply aren’t appropriate. If you are new at this and unfamiliar with the grant-making processes, a good place to start would be the website Grants.gov, which not only provides details on government grant programs but general advice that can help you in applying for other types of grants.
