Taking out a business loan or line of credit is one way to get the working capital you need to launch or grow your business. But there’s also another option to consider: a small business grant.
Awarded by government agencies, foundations, and corporations, small business grants provide funding to new and existing businesses of all types, and do not have to be repaid. Some grants even come with added benefits like business coaching and mentorships.
Because grants are essentially free money, however, they can be difficult to get. Here’s what you need to know about small business grants.
Key Points
• Unlike loans, small business grants do not need to be repaid, making them a valuable source of funding for startups and expanding businesses.
• Grants are often competitive, with businesses needing to meet specific criteria and provide detailed proposals to qualify.
• Many grants are designed to support specific industries, minority-owned businesses, or businesses in underserved communities.
• Grants are available from both government entities and private organizations, with opportunities at the federal, state, and local levels.
• In addition to grants, businesses can apply for small business loans, merchant cash advances, and business lines of credit to get additional funding.
What Is a Small Business Grant?
A small business grant is a lump sum of money awarded to a business or business owner that, unlike a small business loan, does not have to be paid back. Business grants are offered by federal, state, and local governments, as well as foundations, nonprofit organizations, and corporations.
Some grants are targeted to businesses in specific industries or that are developing certain types of products. Other grants are designed for businesses located in underserved communities or owned by women, minorities, or veterans. In some cases, a grant will come with stipulations about how the money has to be used by the business; in others, there are no restrictions.
Recommended: 7 Differences Between Business Grants and Loans
Why Consider Small Business Grants?
Grants provide a way to get funding without taking on debt. They also offer funding opportunities for startups that might not qualify for a loan. In fact, some grants are available for entrepreneurs who may have nothing more than a great idea for a business.
You’ll want to keep in mind, however, that grants attract a large number of applicants and often come with fairly strict qualification requirements. Plus, the application process can be rigorous. You typically need to supply a lot of information and financial details about your business, plus explain how you plan to spend the grant money.
Where to Find Government Small Business Grants
There are so many different kinds of government business grants available — at the local, state, and federal level — that trying to find the right fit for your business can feel overwhelming. Fortunately, there are some helpful resources and databases that can help streamline your search.
The U.S. Small Business Administration (SBA) and other federal agencies list their government grants for small business on Grants.gov . There, you can search based on criteria like eligibility, categories, and funding agency.
America’s Small Business Development Center, an SBA partner, is a nationwide network of Small Business Development Centers (SBDCs) located throughout the U.S. New and existing businesses can seek free business consulting and low-cost training. SBDC consultants can also help you find a grant for your business.
State Grants for Small Businesses
In addition to federal small business grants, state grants are available for businesses, too. Each state offers unique grant opportunities tailored to specific industries, needs, and demographics, supporting economic growth and innovation locally.
Here’s a comprehensive list of state grants for small businesses:
• New York Small Business Grants
• California Small Business Grants
• Indiana Small Business Grants
• North Carolina Small Business Grants
• Michigan Small Business Grants
• Florida Small Business Grants
• Illinois Small Business Grants
• Arizona Small Business Grants
• New Jersey Small Business Grants
• Wisconsin Small Business Grants
• Maryland Small Business Grants
• Colorado Small Business Grants
6 Private Company Business Grants
Certain private companies offer small business grants. Below is a sampling of what’s available.
1. Visa Everywhere Initiative (VEI)
The Visa Everywhere Initiative (VEI) offers funding to tech-focused startups around the globe. To apply, you need to show how one of your products or services involves Visa products in a creative way. The top award is $100,000, but smaller amounts are also available.
2. FedEx Small Business Grant Contest
The FedEx Small Business Grant Contest is designed to help startups grow and scale their companies. Each year, it awards a $50,000 grand prize and nine additional $20,000 grants. To apply, you need to have been in business for at least six months and have no more than 99 employees.
3. NASE Growth Grant
The National Association of the Self-Employed offers a $4,000 grant to qualifying NASE members to help take their businesses to the next level. Grants can be used for marketing, advertising, hiring employees, expanding facilities, and other business needs.
4. Fast Break for Small Business
Fast Break for Small Business is a grant offered by LegalZoom, along with the NBA, WNBA, and NBA G League, that focuses on helping businesses in underserved communities. The grant provides $10,000 and up to $500 in LegalZoom products and services. Applications are open twice a year.
5. Venmo Small Business Grant
The Venmo Small Business Grant awards 10 small businesses with $20,000, free promotion on the Venmo and PayPal web and social media sites, and professional consulting services. To qualify, you must have less than $50,000 in annual sales and no more than 10 employees.
6. Lenovo Evolve Small Grant
Lenovo’s Evolve Small Initiative is a program that provides funding, mentorship resources, and community support to small businesses located throughout the U.S. and Canada. Each year, the focus and funding amounts of the grant vary.
3 Grants to Start a Business
While many grants are aimed at established businesses, others are designed to provide free money (and sometimes support) to start a small business.
1. The Small Business Innovation Research (SBIR)
The The Small Business Innovation Research (SBIR) and its sister program, the Small Business Technology Transfer (STTR), support small businesses with big ideas in technological innovation. The programs not only provide funding to qualifying small businesses, but also partner those small businesses with federal research organizations to help develop those ideas into commercialization.
2. The Halstead Grant
The Halstead Grant is specific to a particular type of business entrepreneur — emerging silver jewelry artists. The grant includes $7,500 in funding plus $1,000 in merchandise to start a small business.
3. Challenge.gov
If you’ve got a great solution to an existing problem, you could submit your idea to Challenge.gov. This site is a hub for all prize competitions and challenges across the federal government and leverages crowdsourcing to come up with ideas that turn into businesses.
4 Business Grants for Women Business Owners
Some grants are only open to women who run businesses. Below is a selection of available grants.
1. Cartier Women’s Initiative
The Cartier Women’s Initiative seeks women who are making a difference in the business world. In addition to grants of either $30,000, $60,000, or $100,000, winners also receive business and financial coaching.
2. Amber Grant
WomensNet offers several Amber Grants throughout the year, giving away at least $30,000 every month, including “Startup Grants” and “Business Category Grants,” as well as two “$25,000 Year End Grants.”
3. Tory Burch Foundation Fellows Program
This Fellows Program provides 50 eligible women running early-stage businesses with a one-year fellowship that includes workshops, coaching sessions, network-building, and financial resources.
4. The SoGal Black Founder Startup Grant
The SoGal Foundation, along with Winky Lux, bluemercury, and other sponsors, offers several $10,000 and $5,000 startup grants to Black women or nonbinary entrepreneurs. Grant winners also receive fundraising assistance and access to the SoGal Ventures team. Applications are rolling.
Recommended: 30 Small Business Grants and Grant Databases for Women
3 Grants for Minority Business Owners
Here’s a look at just some of the available awards for minority business owners.
1. Galaxy of Stars Grant
Galaxy of Stars, an online network for minority- and women-owned businesses, offers a grant of $2,250 to eligible applicants to start or grow a business.
2. The Coalition to Back Black Businesses
The Coalition to Back Black Businesses offers $25,000 grants to 14 Black business grantees who’ve been selected by a panel of judges. It also awards mentorships and resources to other qualifying small businesses.
3. National Black MBA Association Scale-Up Pitch Challenge
If you have an idea for a Black-owned startup that is scalable, you might want to consider The Scale Up Pitch Challenge. Sponsored by the National Black MBA Association, the competition aims to give eligible startups a chance to connect with venture capitalists and other early-stage investors. Three finalists also receive cash awards (up to $50,000).
How Do You Qualify for a Small Business Grant?
While each grant program will have different requirements for applicants, many share certain criteria.
If the grant is U.S.-based, applicants may be required to be U.S. citizens. If the grant is state-based, applicants may be required to be citizens of that state or doing business there.
Additional requirements for certain grants may include:
• You may only qualify if you have been in business for a certain period of time.
• You may need to operate a for-profit company (or, in some cases, the opposite: a nonprofit).
• You may need to have a business in a particular industry.
The key is reading all of the qualification requirements carefully before applying. This allows you to make sure you meet the criteria before investing too much time in the application process.
The process of applying for a small business grant can be time consuming. You’ll want to write your business plan (if you haven’t already) or refine it. The plan should clearly explain your business and what sets it apart from other competitors, plus detail what you would do with the grant money. Small business grant applications may also require financial data and other relevant information for your business, so having that information organized and prepared can help streamline the process.
Pros and Cons of Small Business Grants
Like any type of small business funding, grants come with both benefits and drawbacks. Here’s a look at how they stack up.
Pros
• You don’t need to repay the money. Unlike small business loans, grants do not have to be repaid, so they’re essentially free money.
• Information is widely available. No matter what type of business grant you’re looking for, a lot of information about grants is available online.
• Provides credibility. In addition to the funds, a grant can provide more visibility to your business and validate your business idea. It can also make it easier to receive other grants in the future, since you’re already a proven candidate.
Cons
• Time-consuming. Just finding the right grant to apply for can require extensive research. And once you do find one, completing the application and making a convincing proposal can take time and effort — and may not result in any returns.
• Hard to get. Small business grants are appealing, so you’re not the only business looking for one. Grants typically receive a large number of applicants, but only a few are chosen.
• Grant money may have strings attached. Some grants come with restrictions about how you can spend the money, and others may require you to spell out your plans for the money in your application. Once you get your award, you typically need to stick with that plan.
Recommended: Guide to Grant Writing for Small Businesses
Alternatives to Small Business Grants
If you don’t qualify for any small business grants (or don’t feel it’s worth the time and effort to apply), you’re not necessarily out of funding options. Here are some other ways you may be able to get the capital you need to launch or grow your business.
Small Business Loans
There are many types of loans for small businesses. For example, the SBA helps businesses by backing up loans made by partner lenders. While banks typically have strict criteria (such as at least two years of business history and a minimum amount of revenue) for business loans, online business lenders tend to have more flexible requirements. Just keep in mind that rates from online lenders are generally higher than those from traditional banks.
Angel Investors
Angel investors are high-net-worth individuals who invest in early-stage startups in exchange for equity in the company. Since they invest using their own money, they aren’t beholden to banks or other institutions. This allows them to invest more freely. Typically, when an angel investor funds your company, you also get access to their expertise and industry contacts, which could help you grow your business.
Merchant Cash Advances
If you do business using credit card transactions, you may be able to get a merchant cash advance (MCA) fairly easily. With an MCA, you get a cash advance in exchange for a fixed percentage of future credit card receipts. Typically, the MCA provider automatically deducts a daily (or weekly) percentage of your debit and credit card sales until the advance, plus fees, is repaid in full. While an MCA can be a quick source of cash, this is one of the most expensive types of small business financing.
Recommended: First-Time Business Loans
The Takeaway
No matter where you are on your business journey, there may be a grant or loan available to help you take it to the next level. While grants provide money that does not need to be repaid, small business loans do need to be repaid, with interest.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
FAQ
Which business grants are considered taxable?
Generally, the money you receive from any type of business grant is taxable and should be reported on your federal tax return. Depending on what state you live in, you may also need to report a business grant award on your state return.
How do you get small business grants?
Small business grants are offered by the government (at the federal, state, and local level), foundations, and corporations. You might start your search with the government database Grants.gov., as well as simply searching “Business [industry] grant.”
Who can get small business grants?
Grants are available for all types of businesses, but you may have a better chance of finding one if your company serves an underrepresented or rural community, is in the tech sector, or is owned by a woman, minority, or veteran.
Photo credit: iStock/mapodile
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