Starting a small business is exciting, liberating, and unfortunately, expensive. Depending on the industry type and market economy, you may need thousands of dollars in startup money and loans. Starting a construction company, for example, requires one to purchase incredibly expensive tools and machinery before opening their doors. Following equipment, a small business owner must have the funding to hire employees, cover office space, and more. Where can you raise all of this money from?
Some people turn to the federal government. There are many grant opportunities available for small businesses. However, “free” money is never just yours for the taking. These grants are usually offered for companies in underrepresented industries, or supporting specific programs. Even if you meet the eligibility criteria, grant composition can be complicated, and the appeal process extremely competitive.
If you’re considering applying for a small business grant, we’ve provided some information that will broaden your understanding, uncomplicate the process, and ultimately help boost your chances of receiving monetary funding.
Small Business Grants Defined
A small business grant is a monetary deposit offered by various government departments and sanctions. Most are available through state or federal departments, but local or county offices do offer a fraction. More specific to the type and mission of a small business, private foundations, corporations, and businesses also provide opportunities for funding. The money is free, meaning you don’t have to pay it back, ever.
How Do You Get One?
Securing a small business grant necessitates research. Strict eligibility can be a disappointment for initial grant applicants, but with time and patience, funding possibilities are abundant and attainable. Some funding appoints solely to business minorities. For example, a grant might fund a business owned by a woman or by a member of the LGBT community. Others may finance companies associated with the arts, a program combating homelessness, or environmental protection activities. Currently, the Innovative Research Program is offering a large amount of grant funding to tech companies.
One place to start your grant search is with the Small Business Administration, a federal department that provides a large list of both grant opportunities and lenders. You can also look on state and federal websites to see if they offer any grants.
Small Business Grant Advantages
There are multiple reasons why finding and applying for a small business grant is worth your time. As mentioned earlier, you don’t have to repay any of the funding you receive; an excellent alternative to a loan, especially for startups already in debt. There are also extensive information and resources available to small businesses trying to receive federal funding. Even a quick online search will return hundreds of results.
The Downsides to Small Business Grants
Of course, there are some downsides when pursuing federal funding. Finding small business grants that you’re organization is eligible for can take hours of research. Once you find one, your still not technically “eligible” unless your business aligns with the overarching mission and value of the organization offering the grant. If it doesn’t, your application might be bypassed, even though you may meet all of the initial criteria.
Be prepared also to handle masses of paperwork; the application alone may end up being 50 pages or more in its final stage. You must also document the entirety of your business purchases, the progression of your program/project, and write up periodic reviews. Grant providers don’t just give you the money and leave—they expect to know where you spend every penny of it.
Typically, a grant application requires you to outline the precise demographics and details of the program/project your business aims to help, and why you believe you should receive the grant. You’ll also likely have to submit a detailed budget and timeline as well as information on the parties participating in the hunt for funding.
Waiting for Approval
After you submit the grant, you are likely to find yourself waiting for months. The review process is often very lengthy, so you can’t expect, even if you’re approved, to receive funds immediately. For those in need of fast cash, a grant is likely not the best option.
Most departments offering small business grants allocate a specific amount of money to give away annually. Once their deposit has vanquished, grants will be unavailable until the next year. Unfortunately, the number of small businesses applying for government grants often outweighs the number of grants available, which accounts for the less than one percent of applicants that receive funding.
Strict Eligability and Usage Guidelines
You may find that you spend an hour researching a grant only to discover your business doesn’t meet the eligibility criteria. If you still pursue the search for funding, be prepared; ineligibility is extremely common. Even if you meet every requirement, one minor discrepancy in your application can prevent you from receiving the grant.
If you receive a grant, you must allocate the funding precisely as you previously outlined. Most grants forbid utilizing funds to pay off loans, leverage standard operating expenses, or fund any personal objectives. If you do and you’re caught, you face harsh fines and even jail time.
Small business grants are just one form of funding for your business. If you need cash quickly to fund your business operating expenses, a loan might be the better option. If you can afford to budget time and believe an aspect of your organizations reflects the goal of an available grant, applying for one can help leverage your startup initiative.