Most small businesses need all the help they can get at the startup stage and beyond. Small business grants can provide a viable funding option when you don't want to put too much debt on a credit card or take out another formal loan. Small business owners can seek available grants through multiple private and public donors, including the federal government. Unlike funds provided by a traditional lender, grant money never has to be paid back and can offer businesses the chance for economic development or financial recovery after any setbacks, such as the coronavirus pandemic.
The eligibility requirements and application process associated with accessing grant money can vary. When looking for grant opportunities, start by checking out the U.S. Small Business Administration (SBA), as this and other federal agencies often publish grant applications on a cyclical basis. Grants.gov is also a great tool for viewing available grant funding across multiple federal donors.
This article will offer details on how to successfully find small business funding through federal grant programs.
What Is a Small Business Grant?
A grant is a way to pay for ideas, projects, recovery initiatives, or other goals via funding sources that don't require or expect repayment. Small business grants help business owners and nonprofit organizations obtain the financial resources they need to grow and function. Government grants are available to support small business owners during times of both capacity building and hardship recovery.
Most grants can be accessed via a specific grant application that asks detailed questions about the company's financial background and fiscal needs. Nonprofits often face a different array of options and requirements than for-profit businesses and may have to provide additional information proving their tax-exempt status during the application stage to access some types of government grants.
Some grants are made available to for-profit businesses through corporate entities. One popular example is the FedEx Small Business Grant Contest, which awards grant prizes in the form of both cash and business services like printing and shipping. No matter what kind of grant or application, keep in mind that the application process tends to be lengthy and detailed for all. Many also include a waiting period that can range from 30 days to up to six months before grant winners are announced and awarded.
How Do Small Business Grants Typically Work?
The process for obtaining a small business grant runs similarly to that of most small business loans, just without the daunting repayment schedules. Local governments and federal agencies will publish the availability of funding at various times throughout the year, and interested business owners can choose to fill out the application for any grants they're interested in and eligible for.
It's highly recommended to read the fine print on all grants so that you can be sure that your business qualifies before moving forward. The application process will not be the same for all grants. Some offer funding only to businesses that plan to use the money a certain way. Others may require that your business show a particular level of economic impact or hardship to qualify. Be prepared to provide your business plan and expect an interview component. You might be asked to speak directly to the grantmaking entity about why you need the money, how you intend to use it, and what difference it will make to the life of your business.
Most grant applications are offered in a digital interface unique to the grantmaker. Most also give the option of downloading the application that can be emailed or mailed in. Technical assistance is nearly always available for this part of the process, and it's smart to read through the grant's FAQs before starting the grant application process.
Do Grants Require Repayment?
Most grants represent the equivalent of free money and don't have to be paid back. There are some relief grants, such as the Paycheck Protection Program (PPP), that require awardees to apply for debt forgiveness or else the grant amount must be returned in full, alongside any accrued interest. Although a PPP loan is a form of federal relief, some will act as grants and others will act as traditional loan programs where principal and interest must be repaid.
Other types of small business relief grants don't offer loan forgiveness, such as the Economic Injury Disaster Loan (EIDL), but may have additional grant components that don't need to be paid back. For instance, if you take out an EIDL loan but can also prove that your company suffered a 30% or greater loss, employs 300 or fewer employees, and is located in a low-income area, you could qualify for one of EIDL's $10,000 additional grants and not face repayment for that awarded sum.
Most grants offered by private entities, nonprofit organizations, or research institutions don't require repayment but may stipulate how the grant money is to be utilized. One example is the Amber Grant, offered by WomensNet both monthly and annually. Women entrepreneurs can apply for this grant, but the funds must be used to expand their businesses.
It's a good idea to join or check in with the National Association for the Self-Employed (NASE) at the top of your grant-seeking schedule. This organization helps small business owners connect with business benefits that might not be immediately visible and can help you navigate which grants must be repaid and which are free money. NASE also offers a monthly $4,000 small business grant each month that's worth staying on top of.
Federal Small Business Grant Options
Finding the right federal business grant program for your company's needs requires a bit of research, as there is an array of choices (many of which are industry-specific and highly competitive). One smart way to weed the field early is to seek local help via a Small Business Development Center (SBDC). The SBDC in your region can help you with funding directly, through networking, and via connection with business mentors. The following sections offer insights into other specific federal grants that your company may qualify for.
Small Business Innovation Research (SBIR) Program
The Small Business Innovation Research (SBIR) program offers small businesses with no more than 500 employees the chance to partner with federal research and development (R&D) teams. To stimulate technological innovation on the national level, the SBIR program awards eligible companies amounts that allow them to test their new technologies and science-based innovations and the opportunity to turn a profit by their commercialization.
An SBIR grant is a developmental grant sponsored by the SBA and intended to be used by the awarded company in bringing a new idea or invention into areas of national commercial need. A few examples of industries classified this way include green building, health care, and water purification.
Small Business Technology Transfer Program (STTR)
Like the SBIR program, the Small Business Technology Transfer program (STTR) is offered by the SBA and focused on broadening innovation and technological research with the aim of commercialization. You can also find field-specific STTR programs through the Department of Energy and Department of Defense.
While both grants actively encourage involvement by research entities like federal R&D centers and universities, the STTR program mandates that every applicant partner with a nonprofit research institution during phases I and II of the funding. STTR grants are only available to U.S. small businesses with 500 employees or fewer.
National Institutes of Health (NIH) Grants
The National Institutes of Health (NIH) is the largest public entity offering funding for biomedical research in the world. The NIH is housed within the Department of Health and Human Services (HHS) and provides a variety of funding options to small businesses dedicated to developing biomedical technology. Because the NIH has such incredible reach, it's crucial to take the time to understand NIH funding opportunities fully before you apply.
Most grants here are specific to certain fields of medical research and require pre-registration and other prerequisites. At present, many of the grants emphasize funding COVID-19 innovation and research. Eligibility will vary widely from grant to grant, but all NIH grants share the common thread of being connected in some way to the advancement of medical technology research.
Department of Justice (DOJ) Grants
The Department of Justice (DOJ) provides grant opportunities to a variety of businesses with initiatives aimed at bettering the criminal justice system. As the DOJ oversees a host of smaller governmental agencies, its overview of grants ranges from supporting law enforcement to conducting research or promoting activities aligned with state, local, or tribal legislative goals.
Grant application eligibility will vary by awarding agency, but all awardees are subject to mandatory audits and reporting requirements associated with the grant funds received.
USDA Rural Development Grants
The U.S. Department of Agriculture (USDA) offers unique funding opportunities for small businesses located in rural and low-income areas. Of particular interest are businesses dedicated to developing commerce and infrastructure in areas of critical need, such as renewable energy and distance learning and telemedicine.
The USDA also provides many zero-interest loan options for rural small businesses to do everything from obtaining faster broadband internet to expanding investment. USDA grants are available to all fields of small business so long as they can prove that they're operating predominantly in a disadvantaged or remote region.
National Institute of Food and Agriculture (NIFA) Grants
The National Institute of Food and Agriculture (NIFA) is a subsector of the USDA that offers three kinds of funding opportunities geared toward food research and agricultural education. These grants are non-competitive, competitive, and capacity-building.
Read carefully when conducting research on grants sponsored by the NIFA, as many require a business entity to operate as a nonprofit or be of a significant size to be eligible. The steps toward application for a NIFA grant are determined by which category it falls into, but NIFA provides automatic pre-application, award, and post-award guidance throughout the entire process.
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Let Skynova help with the organization of your small business's forms and bookkeeping so that you can focus on finding the grants to move your company forward.
Notice to the Reader
The content within this article is meant to be used as general guidelines and may not apply to your company's specific financial situation. Always consult with a professional accountant or another financial specialist to ensure that your grant-seeking activities align with industry regulations and your unique business goals.