Small Business Grants: What Are They & How To Find Them

Whether you're starting a new business or looking to grow yours, the ability to secure funding can make or break your plans for the future. Winning small business grants, in particular, can provide funds to grow your business in many ways. But before you start applying for them, familiarize yourself with what they are, how they compare to business loans, the types of grants available, and some tactics that may help increase your chances of receiving one.

What Is a Small Business Grant?

A grant for small business is a specific amount of money given to an entrepreneur or business owner by an organization or government agency for a designated purpose. It's generally considered gifted money, and recipients aren't required to pay it back. They may need to pay taxes on the amount awarded and should factor this in before applying. A small business can secure funding through a grant to advance a specific program or initiative, such as improving operations, expanding the team, or opening another location.

Grants vs. Loans: What's the Difference?

Grants and loans are both sources of small business funding. But what are the differences between grants vs. loans? First, a grant is money given to you that doesn't have to be repaid, provided you don't violate the grant's terms. On the other hand, a loan is money borrowed and must be paid back in full plus interest to the lender.

Another point of difference is the application process. While you must apply for grants and loans, a loan servicer primarily considers your ability to repay the money. A lender will look at personal and business credit scores, annual revenue, years in business, and other business and financial documentation to decide whether you qualify for a loan. A small business grant application may ask for similar business financials, but it will also consider your merit and how well your business meets eligibility criteria. As we'll explore in more detail, most grants have eligibility requirements for business location, size, and industry. Others will specify that the business be owned or run by women, members of underrecognized or socially and/or economically disadvantaged groups, or members of a specific organization.

Who Is Eligible for Small Business Grants?

Your small business grant eligibility depends on the specific grant you want to apply for. For example, a federal grant program will have unique eligibility criteria vs. those of a corporate grant. One small business grant program may require you to be in a particular industry, while others may require you to be in business for a certain amount of time or meet a specific revenue threshold.

You may be required to meet specific requirements, submit proposals, participate in interviews, and meet reporting and auditing criteria as part of the grant selection process. Read the complete eligibility criteria before applying; otherwise, you risk wasting time and resources on a grant that ultimately doesn't apply to your specific business. Also, remember that since this is gifted money, the organization may be highly selective when awarding grant recipients.

Types of Small Business Grants

Often, the most time-consuming part of the grant process is finding one you're eligible for that's also a good fit for your business. There are several types of grants for small businesses, each with its eligibility requirements. While the sources mentioned below are not an exhaustive list, they can be good starting points as you look for a business grant for your small business.

Small Business Federal Grants

The federal government is the biggest distributor of grants for small businesses in the United States. As such, there can be a lot of competition for them. But it's still worthwhile to look into opportunities from sources such as:

• The U.S. Small Business Administration (SBA) which, in addition to its loan program, offers limited small business grants and grants to states and eligible community organizations to promote entrepreneurship
• The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, both opportunities from the National Institutes of Health, which award more than $1 billion annually to support tech-focused businesses to develop and research technologies for several government institutions
• Federal agencies such as the Department of Agriculture (USDA), Department of Energy (DOE), and Environmental Protection Agency (EPA), all of which offer grants to specific types of small businesses

State and Regional Grants for Small Business

Many states and municipalities offer grant money for small businesses that can directly benefit the region. There may be less competition for these than federal grants, but they may also tend to be for less money.

To find a state or local-level grant, research sources such as:

• The State Business Incentives Database, where you can search for available grants by location
• Small Business Development Centers (SBDCs), which partner with the Small Business Administration, are available nationwide, and show you how to find grants for small business
• The U.S. Economic Development Administration's (EDA) economic development directory

Corporate Small Business Grants

Motivated by a desire to give back to the community or help a small business grow, many large corporations have a philanthropic arm that awards grants to businesses. Grant opportunities here are vast; there are awards for innovative ideas, social good programs (such as children's camps), or businesses that are at least 50% owned by veterans, to name a few. Corporate grants also tend to be competitive, but they're worth considering. Some notable corporate grants for small business are:

• The Venmo Small Business Grant program, which awards 20 eligible small businesses with $10,000 in free funding, public promotion on the Venmo website and social media accounts, and mentorship from industry leaders
• The Amazon Small Business Grant Program, which awards over $250,000 in grants plus other prizes to a total of 15 recipients, provided they have an Amazon business account
• The FedEx^® Small Business Grant Contest, which awards $30,000 each to 10 for-profit small businesses that have a valid FedEx business shipping account number, currently ship with FedEx, and have fewer than 99 employees

Demographic-Based Small Business Grants

To help spread entrepreneurial success across demographics, many organizations focus funding efforts on specific communities that are underrecognized in business. Some opportunities include:

• Grants for veterans: Many grants are available for veteran-owned and military spouse businesses. The Second Service Foundation, Warrior Rising, and Antares REACH Grant Program are all corporate grant opportunities to consider. Government grants may also be available on a limited basis, such as the Service-Disabled Veteran-Owned Small Business Program offered through the Small Business Administration, which helps qualifying veteran entrepreneurs obtain government contracts.
• Grants for women: Businesses owned or run by women may have opportunities to apply for corporate grants, such as the Atomic® Grant program and High Five Grant. Check the Grants.gov database to find federal grants as they become available. The SBA-sponsored Women's Business Centers located across the country can also help women entrepreneurs with business development and access to capital.
• Grants for minorities: Many government agencies offer grants to underrecognized demographics, although some aren't explicitly reserved for minority-owned businesses. USDA loans and grants at the federal level, the EDA's economic development grants at the state level, and several corporate grants are great places to start researching.

The U.S. Department of Commerce's Minority Business Development Agency (MBDA) also supports minority-run and/or -owned businesses to access grants and investment opportunities. The agency runs a national network of business centers that can advise business owners on where to find funding.

Startup Grants for Small Business

Given that most grant applications require that you show financials and other proof of business stability, this can automatically make entrepreneurs ineligible. That's why some state and local governments and corporations have set up grants to help entrepreneurs get their ventures off the ground. Look into sources for funding for startup grant opportunities, such as:

• Grants.gov, where government agencies will post new grant opportunities and indicate whether startups are eligible
• Small Business Innovation Research program for tech startups to develop and research innovations for federal agencies that have the potential for commercialization in areas such as homeland security, clean drinking water, healthcare, and green construction
• Incfile Fresh Start Business Grant, which offers up to $2,500 to cover startup costs and funding for students who want to start their own business
• The Amber Grant, which awards $10,000 each month to qualifying female entrepreneurs, with an additional grant awarded to one of the 12 winners annually

How To Get a Small Business Grant

Even with a strong application, there's no guarantee you'll receive a small business grant. Since they're such an attractive source of funding for businesses, grants tend to be competitive. Even so, what you can do to maximize your chances is take the process seriously and do your homework: research grant opportunities in-depth, think about how and why you are applying for a specific grant, and give yourself ample time to develop a robust application.

Here are some ways to help your chances of receiving a small business grant:

• Reach out directly to the organization: Before applying, consider proactively contacting the donor. Ask clarifying questions about the grant and explain why you think your business is a suitable candidate. The donor organization can provide valuable information and resources. It's also a great way to make a personable and strong first impression.
• Read the grant objectives: Thoroughly refer to the granting organization's objectives, ensuring that your application reflects them well.
• Focus on your business plan: A business plan is often a significant factor in your small business grant application. The business plan you submit as part of your grant application should explain individual company strengths, facets of the company poised for growth, why you are applying for the grant, and how it would help your business develop.
• Research previous recipients: Research past recipients and consider how your business compares. This exercise can help you decide whether your business is a good fit.
• Explain how you would use the money: Most grants for small businesses are awarded for a specific business purpose. Many grants may also ask applicants to address the "why" behind their motivation to receive the grant, aside from financial gain. A strong story can help a grant application stand out.
• Check whether you can match: Many grants require the recipient to match the grant amount with investment from their own funds. Determine whether this is financially feasible for you before applying.
• Apply early: Many donors will be open to applications until they've granted the money. Others may have a specific deadline. Either way, you must keep up with opportunities and apply for grants as early as possible.
• Take time with applications: The grant application process can be long and arduous. Rushing could lead to an oversight or mistake on the application that could cost you the grant.
• Consider hiring a grant writer: A grant writer is familiar with the process and knows what language to use to make an application stand out.

How To Apply for Small Business Grant Funding

It's worth spending the time to make your business grant application as professional and well-developed as possible. The actual process will vary by grant and donor, but generally, you should expect to complete the following steps:

• Check eligibility: Whether the grant is from the government or a corporation, issuing organizations will have particular objectives for what the money must go toward and the requirements for eligible businesses. A wise first step before doing anything else is to review these criteria carefully and contact the grant administrator if you need clarification.
• Gather appropriate documents: Most grant applications require you to submit documents supporting your application. The exact information you need will depend on the specific grant and be outlined in the grant requirements. Still, most applications will ask for a business plan, a current business budget indicating how the money awarded would fit in, and a justification for the grant. Additional information that might be required as part of a grant application include:
  • Employer Identification Number (EIN)
  • Revenue history
  • Organizational chart, including the number of employees
  • Bank statements
  • Tax returns
  • Any current contracts your business holds
  • Location(s)
  • Contact information

• Complete your application: Many donors have an online application process for small business grants. However, online application platforms vary between donors, meaning the application process and time it takes to submit for one grant can be completely different from another. In addition to supplying specific business documentation, you may have to answer questions about your business and how you plan to use the grant.
• Wait and follow up: It can take months for donors to decide which business will be awarded a grant, so be prepared to wait. Websites such as grants.gov allow you to track your application in the meantime. There may also be instances where you must follow up with the donor to check on your application's progress.

Alternatives to Small Business Grants

Outside of grants for business owners, there are many alternatives to consider when looking for funding sources.

Tax Credits

There are several federal government tax incentives in the form of business tax credits or tax breaks for small businesses. Some popular ones are:

• Small Business Health Care Tax Credit: This credit is available to eligible small employers that provide healthcare coverage to employees.
• Work Opportunity Tax Credit: Available to businesses that hire people from certain groups, such as veterans, ex-felons, or food stamp recipients. WOTC allows businesses to earn equal to 25% or 40% of a new hire's first-year wages, up to the maximum for that worker's target group.
• Employee Retention Tax Credit: Originally introduced during the pandemic, the ERTC is a refundable credit that businesses can claim on qualified wages, including certain health insurance costs, paid to employees.

It's worth noting that it takes time to understand how tax incentives work, identify credits that you may be eligible for, and claim tax breaks. Experts in tax services can help you navigate the process.

Incentive Programs

Beyond grants and tax credits for business owners, cities, counties, and states offer incentives for businesses that can help stimulate the economy and improve the lives of residents.

State Hiring Incentives

Many states offer hiring credits akin to the federally funded WOTC. The qualifications, application process, and amount of credit will vary by state, but state hiring incentives are a great way to help offset your expenses when it's time to bring on new employees. Ensure you understand a program's requirements before bringing on new hires.

Expansion Incentives

Governments have much to gain by encouraging businesses to establish themselves in, relocate to, or stay in a specific locality. Depending on the particular credit, generally, a government agency will want to know specific details on how your business will improve the region, including:

• Will your business improve the appearance of the surrounding area?
• Is your business part of a region's targeted industry?
• Are you relocating to a place that is distressed or needs redevelopment?
• Do you have other sources of funding for your startup or an expansion?

Job Creation Incentives

Because local, state, and federal governments want to strengthen the economy and invest in their future, incentives are available for businesses that create job opportunities for residents. Eligibility criteria may be based on location and industry, and the types of expenses reimbursed will depend on the locality (e.g., employee relocation, job training costs, and workforce development expenses). Incentives will also generally be disbursed only after eligible businesses reach particular benchmarks — job creation, capital expenditure, and payment of state taxes, for example.

Non-Traditional Funding Sources

You may also wish to consider non-traditional or alternative funding sources for your business. Here are some common tactics.

Using Personal Credit

Using personal assets like cash savings or home equity collateral is a popular method for financing a business. Other personal credit funding options for a new business could be an unsecured personal line of credit or a home equity loan if you're a homeowner.

Borrowing Against Your 401(k) or Life Insurance

You could consider borrowing from yourself. If you're eligible for a 401(k) loan, you may be able to borrow up to $50,0000, based on your current balance, and pay the funds back within 5 years of taking out the loan plus interest. If you pursue this option, you must review the specific rules associated with your 401(k) plan. Some plans allow loans only for particular purposes. In many cases, you must remain with your employer until you repay the loan because it may become due when you leave your job, or the amount will be taxed as an early withdrawal.

You may also want to pull out your life insurance policy and read the fine print to determine if and when you can take a loan against the current cash value. Contact your insurance professional for details on how borrowing against life insurance works, and always calculate a cost-benefit analysis before borrowing from your retirement or life insurance funds.

Crowdfunding

Crowdfunding refers to funding a business (or any endeavor) with small-dollar contributions from many donors, patrons, or investors. You can set up a campaign on an online platform that fits best with your business. Each platform has its own fee structure, so it's a good idea to review the list of charges before you launch your campaign.

Find Angel Investors

These individuals are high-net-worth investors who provide seed capital to startups. To find an angel investor, let your family, friends, and business contacts know you're looking for funding. When searching for this type of investment in your startup, have a solid business plan prepared and be ready to pitch your ideas when asked.

Small Businesses Require Unique Solutions

Securing funding for business takes time and effort, but the payoff can be worth it. Whether you're looking for the best business loans or grants or are thinking ahead about growth, get the help you need with our small business solutions.