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What could be better than free money to help you start or expand your business? Many people hope to find a small business grant, but getting one isn't easy. Unless you know where to look and how to apply.
Where to find business grants
One of the first places you might think of for a grant is the U.S. Small Business Administration (SBA). But one look at its website may dash your hope because it says that websites or other publications claiming to offer "free money from the government" are often scams.
SBA Women's Business Representative Thaddeus Hammond says the only grant programs available through the SBA are the Small Business Innovation Research and the Small Business Technology Transfer grants, and "those are only available if you're engaged in research and the development of technology."
In Canada, you might have more luck. Tim Reitsma, a cofounder of People Managing People, says his business recently received a small grant through the Canada Periodical Fund to help secure recording equipment, pay for some marketing, and cover other fees.
Who can get a business grant?
According to USA.gov, the federal government awards grants to organizations such as:
- State and local governments
- Research labs
- Law enforcement organizations
Those grants are intended to fund projects that will benefit specific parts of the population or the community as a whole. Note that grant income is taxable.
But don't let the lack of federal government small business grants get you down. Money is out there—you just have to look for it in different places.
Start with the federal database Grants.gov. "It's the most comprehensive source," says Janice Donaldson, regional director of the Florida Small Business Development Center at the University of North Florida.
"Increasingly, nonprofits and community organizations are acting as microlenders, using grants to help inject cash into their communities through qualified businesses," says Carter Grieve, head of growth for NorthOne bank for small businesses, startups, and freelancers. "These organizations, as well as some private companies, offer programs of different sizes ranging from a few hundred to tens of thousands of dollars." Competition is tough, though, he says. "Requirements vary, so business owners should do their research to see if they qualify."
"Up until COVID-19, there really weren't a lot of grant opportunities for for-profit businesses," Donaldson says. "If you were a nonprofit, there were lots of grant opportunities, but if you were not a 501(c)3, you just weren't eligible for a lot of grants."
Since COVID-19, Donaldson says, more grant opportunities have opened up for small businesses. "Everything from Facebook to Salesforce were offering grants, and they all ran out of money within hours of [the offering]."
How to get a small business grant
Ty Stewart, CEO and president of Simple Life Insure, says the best option for getting a small business grant is to inquire about grants with local economic development associations. A small business development center in your region is a good option. "These groups include both government agencies dedicated to your municipality's economic health, plus often private groups committed to the same growth," Stewart says.
Looking into specialty grants, like those for veteran-owned or women-owned businesses, etc., is also a good idea, according to Stewart.
One avenue often overlooked is your own network. Stewart suggests directly tapping your network to widen your grant search. "Call or email colleagues and associates to inquire if they're aware of any open grants or sponsorships," he says. "Some larger corporations, themselves, even offer such small business grants. Having contacts in these organizations gives you a leg-up, as some require a nomination to apply in the first place."
Another type of grant is a gift, Donaldson says. "We get calls every day from people who want to start a business, and they want a grant," she says. "I don't blame them. I think that would be awesome. But there's just very limited options when it comes to grants." She notes, though, that a lot of small businesses find success when they ask a relative or close friend to invest in their business idea. Any gift up to $15,000 has no tax implications.
How to increase your chances of getting a small business grant
"Getting a grant can mean the difference between a successful and unsuccessful project," Reitsma says.
It's worth trying to secure one. To apply for a small business grant, fill out the application form completely. "Be sure to specify your primary objectives for the grant and the results you expect to receive from your business plan," Reitsma says. "The process can take several weeks; it depends on the timeline of the grant. Also, be sure to be as precise as possible with how you intend to use the grant money." Often, rules dictate how you can use the money.
The bottom line is: Do your homework. Exhaust every avenue. The wider you search, the more likely you are to find something that fits your needs.
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