Starting a small business is rewarding, yet securing initial funding is a common hurdle. Grants provide financial support without the obligation of repayment, but the allure of 'free money' typically results in stiff competition. As an entrepreneur, understanding the various types of grants, their advantages and limitations and the application process will help you secure grants that align with your business needs and increase your chances of acceptance.
Small Business Grants: Your Guide to Finding Funding
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Small Business Grants Key Takeaways
Understanding the landscape of small business grants helps entrepreneurs looking to finance their ventures effectively.
Grants provide non-repayable financial aid to foster business growth, innovation, or project development.
A broad range of grants are available, including federal and state grants, industry-specific funds and those aimed at particular demographics, such as women or veterans.
In contrast to loans, grants are "free money" with no repayment obligation, whereas loans accrue interest and require repayment.
Entrepreneurs should regularly visit federal and state government websites to find grants, connect with industry organizations and nonprofits and look into corporate programs. Keep in mind that grants are often time-sensitive.
What Is a Small Business Grant?
Small business grants are funds designed to support ventures that may not appeal to conventional lenders yet offer significant community value. These grants, sourced from government entities, private corporations and philanthropic organizations, are unique because they do not require repayment. The amount awarded can vary significantly, with some grants as modest as a few hundred dollars and others providing substantial support well over $10,000.
Grants vs. Business Loans: Key Differences
Grants may seem the ideal choice due to their non-repayable nature, but they come with their own challenges and stipulations. On the other hand, while requiring repayment, business loans can offer more flexibility and may be more accessible.
Aspect | Business Grants | Business Loans |
|---|---|---|
Repayment | Not required. | It must be repaid with interest. |
Source | Governments, corporations, philanthropists. | Banks, specific lenders and institutions like the SBA. |
Application Process | Can be rigorous with stiff competition. | Based on creditworthiness and business financials. |
Usage Restrictions | Often targeted with specific spending stipulations. | More flexible, though some loans may have stipulations. |
Tax Implications | Generally considered as taxable income. | Not considered income; interest paid can be tax-deductible. |
Impact on Credit | Doesn't help in building business credit. | Can help build business credit if repayments are made consistently. |
Consequences of Mismanagement | Larger grants may have reporting requirements. | Can lead to repossessed assets, damaged credit score, or bankruptcy depending on the loan agreement. |
Federal and State Small Business Grants
The U.S. Small Business Administration (SBA) is a primary source for federal small business grants, providing various funding opportunities. These include grants and loans available through its Small Business Development Centers, many targeting businesses that focus on research and rural economic development. Numerous federal and state agencies also offer specialized grant programs for small businesses.
Small Business Innovation Research Program (SBIR)
The SBIR program is a competitive grant initiative targeting small businesses engaged in research and development. Its goal is to stimulate scientific and technological innovation. The program is structured into three phases, each designed to serve distinct objectives and advance participants to the next stage of development.
Key Details
Best For
R&D entrepreneurs aiming for technological advancements.
Grant Amount
- Phase 1: $50,000–$250,000 for six months.
- Phase 2: $750,000 for two years, eligible for Phase I recipients.
How to Apply
Submit your application to agency solicitations. Only small businesses in the United States that qualify as a Small Business Concern (SBC) can receive the grant. Visit their website for further information.
Small Business Technology Transfer Program (STTR)
Like the SBIR, the STTR program emphasizes collaboration between research institutions and small businesses. A key feature of the STTR program is its requirement for the small business awardee and its associated institution to formulate an intellectual property agreement.
Key Details
Best For
Technology-focused businesses aiming to collaborate on innovative projects.
Grant Amount
- Phase 1: $50,000–$250,000 for one year.
- Phase 2: $750,000 for two years, eligible for Phase I recipients.
How to Apply
Submit your application to agency solicitations. Only small businesses in the United States that qualify as a Small Business Concern (SBC) can receive the grant. Visit their website for further information.
USDA Rural Business Development Grant
Administered by the U.S. Department of Agriculture, the Rural Business Development Grant program aims to bolster small businesses in rural communities. It focuses on stimulating job creation and economic development and providing financial assistance to businesses that are pivotal in rural growth.
The USDA provides two grant types: Opportunity and Enterprise. Opportunity grants are limited to up to 10 percent of the total annual grant funding. Enterprise grants are for projects that benefit small and emerging businesses in rural areas, as specified in the application. To learn more about how these grants can be used, visit their website.
Key Details
Best For
Rural public entities, including towns, communities and state agencies.
Grant Amount
Varies based on the specific grant type and project.
How to Apply
Ensure your business has fewer than 50 employees, under $1 million in gross revenue and is located in a qualifying rural area. Applications can be submitted through the local or state USDA Rural Development offices and are accepted once per year.
Program for Investors in Microentrepreneurs (PRIME)
The PRIME program offers federal grants to microenterprise development organizations. These organizations also assist disadvantaged microentrepreneurs.
Key Details
Best For
Microentrepreneurs
Grant Amount
Varies based on the specific grant and organization.
How to Apply
Microentrepreneurs should approach and work with microenterprise development organizations that have received PRIME funding.
State Trade Expansion Program (STEP)
The STEP program supports small businesses aiming to expand their reach into international markets. This program grants businesses involved in exporting, assisting them in participating in foreign-market trade shows and other global expansion opportunities.
Key Details
Best For
Small businesses looking to expand their operations internationally, especially those involved in exporting.
Grant Amount
Varies based on the specific grant and business needs.
How to Apply
Businesses interested in the STEP grant should contact the SBA’s Office of International Trade to determine eligibility and application procedures.
Environmental Protection Agency (EPA) Grants
The EPA Grants provide grants for small businesses striving to enhance the environment. These grants support innovative solutions and initiatives that address concerns such as air and water quality, pollution prevention and overall environmental quality.
Key Details
Best For
Small businesses focused on environmental improvements and innovations.
Grant Amount
Varies based on the specific grant and project.
How to Apply
Explore the EPA's official website or attend their grants webinars for further information.
Economic Development Administration (EDA) Grants
The EDA provides various programs, funding opportunities and grant competitions. Note that the EDA doesn't provide direct grants; you can review their funding options and apply accordingly.
Key Details
Best For
Small businesses and startups aiming to contribute to community infrastructure and regional economic growth.
Grant Amount
Varies based on programs.
How to Apply
Regularly monitor the EDA's official website for new grant announcements and competitions.
National Institute of Food and Agriculture Grants
The NIFA provides grants to support small businesses within the agriculture and food sectors through three primary funding mechanisms: competitive, capacity and non-competitive. Competitive grant programs utilize a peer review process to select the best proposals from various institutions. Capacity grant programs help maintain research and extension capabilities within the Land-Grant University System. Non-competitive grant programs, mandated by Congress, support designated institutions in research, education or extension activities vital to state or regional needs.
Key Details
Best For
Small agriculture and food industry businesses.
Grant Amount
Varies, with multiple grants offered throughout the year.
How to Apply
Regularly check the NIFA's official website for detailed application guidelines and grant announcements.
Corporate and Private Grants for Small Businesses
Corporations and large companies often offer small-business grants as part of their philanthropic efforts. Some of these grants cater exclusively to nonprofits servicing industries. A significant number are also available to for-profit companies as well. While the application process might be more competitive, the potential rewards make it a valuable avenue for businesses seeking financial support.
Grant | Best For | Grant Amount | Eligibility |
|---|---|---|---|
Small businesses with an Amazon Business account. | Range from $15,000 to $25,000, a one-year Business Prime membership and free eero Wifi and Kindle Scribe products. |
| |
Small businesses that have been in operation for at least one year. | The main award offers a grant of $25,000, with other category-specific prizes available. |
| |
For-profit small businesses. | Range from $15,000 to $50,000, with additional FedEx print credits for grand prize winners. |
| |
For-profit small businesses. | Range from $5,000 to $25,000. |
| |
Small businesses seeking financial aid and technological support. | Three distinct awards: Platinum, Gold and Silver, each offering different benefits. Visit their website to learn more about the detailed benefits. |
| |
Self-employed entrepreneurs. | Up to $4,000. | Hold a NASE membership. | |
Small businesses with a Venmo account. | $10,000, along with promotional opportunities on Venmo's platforms and mentorship sessions. |
| |
Small business owners looking to enhance their digital knowledge and seeking financial support. | $10,000, with a total grant pool of $500,000 for 2023. |
| |
Tech-forward startups from five global regions creatively incorporate Visa's products. | The grand prize is $50,000, with additional awards for runners-up, audience favorites and regional/local winners. | Offer products with innovative payment solutions. |
How to Apply for Small Business Grants
Grant programs typically operate on annual cycles, announcing recipients well after applications are submitted. Given the fierce competition and precise eligibility criteria, it's helpful to understand the distinct requirements of each grant thoroughly. Using the steps below, you can start crafting a strategic application that effectively highlights the value and potential of your business.
- 1
Craft a Solid Business Plan
Many grants have specific application windows. Mark these dates and set reminders to ensure you start the application process well in advance. Set up alerts or regularly check grant websites to ensure you take advantage of new opportunities. Prepare a detailed business plan outlining how the grant funds will benefit your business.
- 2
Tailor Your Application
Review businesses that previously secured grants to gauge your chances. Avoid using a one-size-fits-all approach. For each grant, customize your application to address each grant's specific requirements and objectives.
- 3
Verify Eligibility
Have all necessary documents ready. This includes your EIN, DUNS number and revenue history. Also, double-check that you meet all the grant's eligibility criteria. This ensures your efforts are directed at viable opportunities.
- 4
Consider Professional Help
Local business organizations can guide you on grant applications. For substantial grants, consider hiring a professional grant writer. Their expertise can help articulate your vision and increase your chances of success.
- 5
Emphasize Innovation, Growth and Alignment
Focus on your business's innovative aspects and growth potential in your application. Highlight emerging technologies and how your business aligns with the grantor's mission.
Specialty Small Business Grants
Specialty small-business grants cater to distinct segments of the entrepreneurial landscape, ensuring that specific groups receive the support they need. These grants recognize their targeted demographics' unique challenges and offer tailored financial assistance. You can access resources that align closely with your needs by tapping into these specialized funds.
Small Business Grants for People From Racial Minority Groups
Entrepreneurs from racial and ethnic minority groups often face challenges in securing funding. Grants tailored for them aim to bridge this gap, offering recognition and financial support.
Grant | Best For | Grant Amount | Eligibility |
|---|---|---|---|
Black women entrepreneurs seeking coaching, resources and funding. | Varies, based on audience contributions during the pitch competition. | Participate in the crowdfunded pitch competition program provided by Black Girl Ventures. | |
Native American small business owners with a history of substantial funding since 1993. | Varies, with a cumulative total of $54.7 million awarded through mid-2022. | Serve rural or reservation-based communities. Eligibility varies per funding opportunity. | |
Entrepreneurs committed to uplifting their local communities. | $5,000 grant, a 30-second TV commercial, media strategy consultation, 180-day media placement and computer equipment. | Must have been operational for at least three years and employ 100 or fewer individuals. | |
Black entrepreneurs with startups in the initial or early stages of development. |
| Have a Black founder with a significant stake in the startup and being an active National Black MBA Association member. |
Small Business Grants for Veterans
After serving our nation, many veterans start a business. For veterans looking to kickstart or expand business ventures, the Veterans Business Outreach Center can be a valuable resource for finding support and assistance.
Grant | Best For | Grant Amount | Eligibility |
|---|---|---|---|
U.S. military members . | Varies, based on events. |
| |
Veteran with a service-connected disability and employment barrier. | Non-monetary. Assists in business planning, operations, marketing and finances. |
| |
Veteran entrepreneurs. | Varies (financial grants are provided based on the business needs and evaluation). |
|
Small Business Grants for Women
Women entrepreneurs are making waves in business. There are grants tailored specifically for women-owned small businesses, aiming to bridge the funding gap and foster growth. Beyond these grants, local Women's Business Centers, with over 100 locations across the United States, offer invaluable resources and guidance. These centers can direct women entrepreneurs to additional grant opportunities or alternative funding avenues.
Grant | Best For | Grant Amount | Eligibility |
|---|---|---|---|
Women entrepreneurs. | Monthly grants of up to $10,000 and an annual grant of $25,000. |
| |
Women seeking career development opportunities, especially those transitioning careers or reentering the workforce. | Range from $3,000 to $50,000. |
| |
Women entrepreneurs from diverse backgrounds. | $5,000 education grant. |
|
Alternative Funding Options for Small Businesses
Small business grants aren't always the most feasible or immediate solution for every entrepreneur. If you find yourself outside the grant eligibility circle or need quicker access to funds, there are several alternative avenues to explore.
Traditional Small Business Loans
Offered primarily by banks and credit unions, these loans are a go-to for businesses with established credit histories. They provide a lump sum of money repaid over a set term, often with competitive interest rates.
SBA Loans
Backed by the U.S. Small Business Administration, these loans are crafted specifically for small businesses. They offer longer repayment terms and lower interest rates, making them a favorable choice for many entrepreneurs.
Business Credit Cards
Business credit cards offer flexibility in financing short-term needs and can come with rewards or cash-back options. These cards are ideal for businesses aiming to optimize cash flow or earn rewards. Discover the best business credit cards to support your operations.
Line of Credit
A line of credit is a revolving credit facility that allows businesses to borrow up to a certain limit. It's a flexible option, ideal for managing cash flow or unexpected expenses, with interest paid only on the amount used.
Invoice Financing
This allows your business to get an advance on its outstanding invoices. By selling unpaid invoices to a third party, companies can improve cash flow without waiting for clients to pay.
Venture Capital
Venture capital involves securing funding from institutional investors. Venture capitalists invest large sums in startups or small businesses with high growth potential, usually in exchange for equity.
Peer-to-Peer Lending
Online platforms like LendingClub and Prosper connect individual lenders with businesses needing funds. It helps you secure a loan without going through traditional financial institutions.
Angel Investors
Angel investors are individuals with significant capital looking to invest in promising startups or early-stage businesses. They often seek equity or a convertible note in return for their investment.
Crowdfunding
Platforms like Kickstarter and Indiegogo enable you to raise funds by showcasing your projects or products to the public. It's a great way to validate a business idea and engage with a community of supporters.
Additional Resources
Here are some resources that provide additional support and tools to bolster your business's success:
- General Services Administration: This independent agency provides resources to help businesses understand government contracting opportunities and how to market their contracts.
- Small Business Development Center (SBDC): SBDCs are corporate efforts that offer many services, including connecting businesses with potential small-business grants. Beyond grant assistance, they provide counseling, training and technical guidance on various business topics, from digital advertising to cybersecurity.
- State Business Incentives Database: This national database offers a user-friendly map feature, enabling business owners to select their state and instantly view available grants, tax credits and exemptions. Access is exclusive to members of the Council for Community and Economic Research (C2ER). A basic C2ER membership, which grants access to the database, is priced at $362 annually.
- Small Business Digital Alliance: This co-sponsorship agreement between the U.S. Small Business Administration (SBA) and Business Forward, Inc. provides a library of tools and resources for small businesses. They offer personalized resources for businesses.
- USBusinessGrants.org: This platform offers information on federal government grants with opportunities for various companies. The site emphasizes the limited small business grants provided by SBA.gov at the federal level.
- U.S. Department of the Treasury Small Business Resources: This platform provides links for reference and information related to small business programs. It does not endorse any non-government websites but offers a comprehensive list.
- LGBTQIA+ Business Grants: A guide to funding options for LGBTQIA+ businesses, including grants, loans and equity investments to support business growth and success.
About Nathan Paulus
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
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