Grants are awesome for your business development too. They give you money you don’t have to pay back. Grants can start a business, grow one or fund a special project. But to get a grant you have to apply and meet the grant providers rules. This article will explain how grants work, how can a grant help your business and how to use them for your business.
What is a Business Grant?
A small business grant is free money for your business. This money is usually provided by the state government itself, private companies, or nonprofit organizations. Businesses can use grants to grow, hire staff, buy equipment, or do research. Unlike loans, grants don’t have to be paid back but must be used for a specific purpose.
To qualify for a grant businesses usually need to show three things:
- They need the money.
- They have a plan for how they will use it.
- They will use it to achieve a specific goal.
There are two types of grants:
- Government Grants: These are from the federal, state, or local government.
- Private Grants: These are from corporations or nonprofit groups.
Related: Small Business Stabilization Grant: A Lifeline for Struggling Businesses
How Are Grants Different From Loans or Donations?
Grants are not the same as loans or donations. A loan is money you borrow and have to pay back with interest. A donation is money you get with no conditions and you can use it for anything. With grants you must use the money for the purpose stated in your application.
For example if you get a grant to buy equipment for your bakery business training you can’t use nearly half of it to pay off a loan. A grant coordinator may check to make sure you use the money correctly.
- Fastest funding 1 business day
- Min. time in business 6 months
- Term lengths Up to 60 months
4.8
- Loan amount Up to $500,000
- Min. time in business 6 months
- Min. annual revenue $250,000
4.8
Best for large business loans
- 3 Months in Business
- $10,000 in Monthly Rev
- Minimum Credit Score 550
4.9
Best for large business loans
- up to $1.5 million
- APR range Not disclosed
- Minimum Credit Score 570
4.7
Best for Small business loans
- Apply in Minutes
- No Hidden fees
- Wide range of Options to choose from
- Get funded in as little as 24 hours*
4.8
How Can a Grant Help Your Business?
Grants are awesome for businesses. Here are the grant recipients main benefits:
No Repayment Needed:
You don’t have to pay back the money. This is a risk free way to get funding.
No Sharing of Ownership:
Unlike investments you don’t have to give up part of your business to someone else. You keep full control of your business.
Better Chances for Future Grants:
If you get a grant once it shows you are reliable. This will help you qualify for other grants in the future.
Many to Choose From:
There are thousands of grants for different types of businesses. You can always find one that suits you.
Small Business Grants:
Various funding opportunities are available specifically for entrepreneurs. These include government, corporate, and nonprofit grants, each with specific eligibility requirements. Specialty grants are also available to foster entrepreneurship among diverse groups.
Related: Bank of America Small Business Grant
Challenges of Applying for Grants
While grants are awesome they also have some challenges. These are:
- Time Consuming Applications: Applying for grants takes time. You need to write a plan and provide financials.
- Tight Rules: Some grants are only for certain groups like women owned or veteran owned businesses. Others require your business to focus on specific goals like helping the environment.
- Limited Use: You can only use the money for what you said you would in your application.
- Not a Guarantee: Even if you get a grant once you may not get it again. Grant programs can change or end.
Alternatives to Grant Funding
While grant funding can be a valuable source of financial support for small businesses, it’s not the only option. Small business owners have several alternatives to explore when seeking financial assistance. One popular alternative is small business loans, which can provide the necessary working capital to start or expand a business. Unlike grants, small business loans must be repaid with interest, but they often offer more flexibility in how the funds can be used.
Another option is equity financing, where business owners sell a portion of their business to investors in exchange for capital. This for investment capital can be a great way female entrepreneurs to raise funds without incurring debt, but it does mean giving up some control over the business. Crowdfunding is also an increasingly popular method, allowing businesses to raise small amounts of money from a large number of people, typically via online platforms.
Additionally, small business owners can look into tax incentives and credits offered by the federal agencies of government, which can reduce their tax burden and free up more funds for business activities. By considering these alternatives, small businesses can find the right mix of funding and annual revenue sources to support their growth and sustainability.
Related: Best Business Loans for small businesses in Ohio 2024
How to Apply for a Business Grant
Applying for a grant is like applying for college scholarships. You need to find the right nonprofit organization for grants, fill out the forms and explain why you deserve the funding.
Step 1: Do You Qualify
Before you apply make sure you meet the grant’s requirements. Most grants are for small businesses and some are for specific groups like women, veterans, or minority-owned businesses. The Small Business Administration (SBA) provides grants specifically for these groups, supporting their growth and innovation. Check carefully to see if your own business idea matches the grant’s purpose.
For example, some grants are for businesses that help the community or solve environmental problems. Others, awards grants are for businesses in rural areas support women or first-time entrepreneurs.
Step 2: Get Your Financials
Grant applications ask for detailed financials. Make sure you have the following ready:
- Income statements
- Balance sheets
- Cash flow statements
- Payroll details
- Equipment and supply costs
Having accurate financials will help the grant or financial aid provider see how you will use the money.
- Fastest funding 1 business day
- Min. time in business 6 months
- Term lengths Up to 60 months
4.8
- Loan amount Up to $500,000
- Min. time in business 6 months
- Min. annual revenue $250,000
4.8
Best for large business loans
- 3 Months in Business
- $10,000 in Monthly Rev
- Minimum Credit Score 550
4.9
Best for large business loans
- up to $1.5 million
- APR range Not disclosed
- Minimum Credit Score 570
4.7
Best for Small business loans
- Apply in Minutes
- No Hidden fees
- Wide range of Options to choose from
- Get funded in as little as 24 hours*
4.8
Step 3: How the Grant Will Help Your Business
This is the most important part of your application. You need to show how the grant will help your business grow or solve a problem.
Write a clear and concise description of your business’s history, goals and plans. If writing isn’t your thing you can hire a grant writer to help. They know how to make your application stand out.
Step 4: Apply
Once you have completed your application submit it through the right platform. For government grants use Grants.gov. For corporate or private grants apply through their website. Double check everything before submitting to avoid mistakes.
Types of Small Business Grants
There are many types of grants for businesses. Here are some of the most common financial awards available grants:
Government Grants:
These are from federal, state or local government. Examples are SBA programs or regional grants for specific industries. A notable example is the National Science Foundation, which provides small business grants through the Small Business Innovation Research Grant program. For instance, a solar company received a grant from the National Science Foundation to advance its renewable energy technology.
Corporate Grants:
Big companies like Walmart and FedEx offer grants to small businesses. Some are for women owned or minority owned businesses.
Specialty Grants:
These are for specific groups like veterans, women or nonprofits. For example Warrior Rising offers grants and training for veteran entrepreneurs.
Federal Government Grants
Federal government grants are a type of grant funding provided by state agencies and the federal government to support small businesses. These grants are often aimed at specific sectors or initiatives, such as research and development, exporting, and economic development. For instance, the Small Business Innovation Research (SBIR) program offers grants to small businesses engaged in scientific research that has the potential for commercialization.
The Economic Development Administration (EDA) also provides grants to local governments to support regional economic development projects that create jobs, support entrepreneurship, and stimulate private investment.
These federal business grants can be a significant boost for small businesses looking to innovate, expand, or enter new markets. However, the application process can be competitive and requires a detailed proposal outlining how the funds will be used to achieve specific goals.
State and Regional Grants
State and regional grants are another valuable source of grant funding for small businesses. These grants are provided by state and national association and local state and territory governments, and are often designed to support economic development, job creation, and business expansion within a specific region. For example, many states offer grants to businesses that are creating new jobs or investing in local communities.
These grants can be particularly beneficial for small businesses in rural communities that may not qualify for federal grants but still need financial support to grow. State and regional grants often have less stringent application processes compared to federal grants, making them more accessible to small businesses. By tapping into these local financial resources, small businesses can contribute to the economic vitality of their communities while securing the funding they need to thrive.
How to Use Grant Funding
Once you get a grant use it smart. Here are some tips:
- Follow the Rules: Use the grant money for what you said you would in your application. Using it for something else could cause problems.
- Track Your Expenses: Keep a record of how you use the money. Good bookkeeping will help you stay on top of things and avoid mistakes.
- Evaluate Your Results: Once you’ve used the grant assess if it helped your business. Did you achieve your goals? Did it increase your profits or operations?
Example of Using a Grant
You own a bakery. You apply for a grant to buy a new oven and hire more staff. If approved you must use the money for those two things only. Using it for rent or advertising would be against the rules.
Managing Grant Money
Once a small business has been awarded a grant, it’s essential to manage the grant money effectively. Proper management ensures that the funds are used for their intended purpose and helps maintain compliance with the grantor’s requirements. This includes keeping detailed records of all expenses and regularly reviewing the budget to ensure that the various funds provided are being used efficiently.
Use Grant Funds Effectively
Grant funds should be used for the specific purpose outlined in the grant proposal. This may include hiring new employees, purchasing equipment, or expanding marketing efforts. It’s essential to use the grant funds effectively and efficiently to achieve the desired outcomes. For example, if the grant was awarded to purchase new machinery, ensure that the machinery is purchased and used as planned to improve business operations.
Keeping track of all expenses related to the grant is crucial. This includes maintaining receipts, invoices, and financial statements that document how the funds were spent. Regularly reviewing these records can help identify any discrepancies and ensure that the funds are being used appropriately. Additionally, many grantors require periodic reports on how the funds are being used, so having accurate records will make it easier to provide these updates.
By using grant opportunities, using training programs and managing grant money effectively, small businesses can maximize the benefits of the grant and demonstrate their ability to use funds responsibly, which can improve their chances of receiving future grants.
Don’t Rely Only on Grants
Grants are great but shouldn’t be your only source of funding. Here’s why:
- Uncertain Renewal: Grant programs can change and you may not get funded every year.
- Time Consuming: Each grant application takes time and effort. This could take you away from running your business.
Instead use grants as part of a bigger plan that includes other funding sources like loans other organizations that provide grants, savings or equity financing.
A grant can be a powerful tool to help your business grow. It’s free money to invest in your goals without debt or equity. But applying for grants requires effort and you must follow the rules.
By using grants wisely and combining them with other funding sources, you can raise money that can strengthen your business and achieve long-term success.
Frequently Asked Questions
How Would a Grant Help Your Business Examples?
Grants can significantly impact a small business by providing the necessary funds to achieve specific goals. For example, a small bakery might use grant money to purchase a new oven, allowing them to increase production and meet growing customer demand.
A tech startup could use a grant to fund research and development, enabling them to innovate and bring new products to market. Additionally, a grant could help a rural business expand its operations, hire more staff, and contribute to local economic growth.
What is a Benefit of Receiving a Grant to Fund Your Business?
One of the primary benefits of receiving a grant to fund your business is that it provides financial support without the burden of repayment. Unlike loans, grants do not require you to pay back the money, allowing you to invest in your business’s growth and development without incurring debt.
This can be particularly advantageous for small businesses that may struggle to secure traditional financing. Grants also offer the opportunity to pursue projects or initiatives that might otherwise be financially out of reach.
Can You Pay Yourself with Grant Money?
Generally, grant money is intended to be used for specific purposes outlined in the grant proposal, such as purchasing equipment, hiring staff, or funding research. While some grants may allow for a portion of the funds to be used for salaries, it’s essential to adhere to the grant’s terms and conditions. It’s advisable to consult with the grantor or review the grant agreement to determine the specific criteria and if using funds for personal compensation is permissible.
Can I Spend Grant Money on Anything?
No, grant money must be used for the specific purposes outlined in your grant application. Grantors expect recipients to adhere strictly to certain criteria and to the proposed budget and use the funds to achieve the stated objectives.
Misusing grant funds can result in penalties, including the requirement to repay the grant or disqualification from future funding opportunities. It’s crucial to maintain accurate records and ensure that all expenditures align with the grant’s intended purpose.
- Fastest funding 1 business day
- Min. time in business 6 months
- Term lengths Up to 60 months
4.8
- Loan amount Up to $500,000
- Min. time in business 6 months
- Min. annual revenue $250,000
4.8
Best for large business loans
- 3 Months in Business
- $10,000 in Monthly Rev
- Minimum Credit Score 550
4.9
Best for large business loans
- up to $1.5 million
- APR range Not disclosed
- Minimum Credit Score 570
4.7
Best for Small business loans
- Apply in Minutes
- No Hidden fees
- Wide range of Options to choose from
- Get funded in as little as 24 hours*
