Over 99% of businesses in the United States are considered small. It’s equivalent to almost 32.5 million firms, according to Small Business Administration statistics in 2021. The federal government has shown continued interest in their success by providing grant money to eligible entrepreneurs to support their businesses. Here, you will learn the ups and downs of small business grants, tips on how to apply, where to find them, and a list of grants you may qualify for!
What are small business grants?
Small business grants are monetary awards and financial assistance to small organizations and businesses. The federal government, private companies, and state and local governments provide these funds to entities that meet the eligibility requirements. Unlike small business loans, these grants don’t need repayment.
However, grants are very limited. There are many applicants compared to the number of grants currently available. Also, these come with dozens of guidelines and requirements, grant writing proposals, efforts in research, and a business plan on how you will spend the money. Failure to meet the qualifications will lower the chances of securing a grant.
When eligible businesses receive grant money, they can use it for the following purposes:
- Purchasing new equipment, machinery, and inventory
- Capital reserves to stabilize cash balance while waiting for receivables
- Renovation of facilities
- Staff training and hiring
On the other hand, money from federal government grants cannot be used for the following:
- Personal benefits
- Paying off debts
- Starting a business
1. Doesn’t need repayment
The best advantage of grants to local small businesses is they don’t need repayment. This makes it an attractive proposition for several small businesses facing financial difficulties that make them unable to afford a traditional business loan with interest rates.
2. There are many resources
Although it may seem challenging to find small business grants, there are many online resources for available grants.
- Small Business Administration has a dedicated section on its website for grant funding that directs users to Grants.gov. You can also get a counselor to help you decide on the funding options here.
- Federal agencies post a funding opportunity announcement (FOA), where they publicize the available grant opportunities to the public. These announcements are published on Grants.gov.
3. Targets most unsupported businesses
There are many specialized grants for nonprofit organizations and underrepresented firms in the economy, such as women, veteran, and minority-owned businesses. These businesses usually can’t access funding elsewhere and are often overlooked by big companies and banks. There are also many requirements to meet, which significantly limits the number of applicants.
4. Feel-good factor
Grant funding is a great way to boost your business growth with potential clients and suppliers and gain confidence to deliver on your business promises. It can also be relieving to have everything covered, such as equipment, business expansion, hiring of talents, and more.
Although federal small business grants are “free money” from the government, it costs a large amount of time. It’s because grant applications need lots of paperwork. The writing of grant proposals alone is a very tedious and lengthy process.
Aside from the application, small business owners should present documentation representing their products and services, market demographics, and reasons for the grant application. The “need” section is critical in the application because it’s the section where applicants state their needs for support.
2. Very strict requirements
Grants that involve federal funds often have complicated requirements and an extensive examination of proposals, data tracking, and submission. For example, the National Telecommunications and Information Administration requires grant applicants to submit a five-year action plan on how they plan to work with regional and local bodies to distribute broadband networks to boost connectivity and telehealth access.
3. Grant approvals take time
After writing your grant proposal and submitting it, it would generally take up from weeks to 90 days to get a response if you got approved or not. As a small entrepreneur who has limited resources and doesn’t have time to spare to wait for approvals, applying for any federal grants might be unnecessary.
4. Extremely competitive
The competition for government small business grants is highly competitive. Besides the rigorous application process and crafting a winning grant proposal, the number of applicants always outnumbers the available grants to be awarded. However, with enough persistence and planning, you can heighten your chances of winning.
Where to find free government small business grants?
This list of resources expands funding opportunities for entrepreneurs. They include financial assistance for research, training, education, technical assistance, and more.
1. State Trade Expansion Program (STEP)
The State Trade Expansion Program (STEP) started in 2011 and will end in September 2022. The SBA awards this grant program to state and territory governments. Its goal is to provide grants for small businesses to find international partners and customers in the marketplace by covering costs associated with exporting, entering, and expanding into global markets. Here’s a list of eligibility requirements for some states:
2. Small Business Innovation Research Program (SBIR)
The National Institute of Health administers the SBIR program in the Agriculture Department. It is a federal program designed to fund the commercialization of innovative new technologies developed by small businesses and invests up to $1 billion annually. Grants are divided into three phases:
- The first phase is limited to $200,000 with a duration of nine months.
- The second phase is up to $1 million and is only open to the first phase’s small business concern awardees with a maximum of two years.
- The third phase is for the complete development and commercialization of the project.
Some of the research topics include:
- Natural resources conservation
- Food science and nutrition
- Small to medium-sized farms
- Biobased products
3. National Institute of Health Grants
The NIH is a federal agency that supports the medical research of small businesses that can create jobs. Its exploratory/developmental grant funds exploratory and developmental research projects in the early and conceptual period. The research may be risky but also has great chances of a breakthrough in the field, which may lead to the discovery of new techniques, applications, methods, and more for the benefit of clinical, behavioral, and biomedical research. In 2021, the NIH-funded grants had a success rate of 19.1%, which was lower compared to the previous year of 20.6%.
4. Small Business Technology Transfer Program (STTR)
The Small Business Technology Transfer is another program that provides funding for SBA grants for small business research projects. It also has three phases of funding with separate federal contracts for the first and second phases. The differences between STTR from SBIR are the following:
- Small businesses conducting research for STTR should form a joint venture with a nonprofit organization, whether a federal laboratory or a university.
- STTR programs are focused on technology transfer from a research institution to a small business to make it to the marketplace after undergoing the three phases.
While 11 federal agencies support the SBIR program, five of them both support STTR and SBIR, including:
- Department of Health and Human Services
- Department of Energy
- Department of Defense
- National Science Foundation
5. National Association for the Self-Employed (NASE) Growth Grants
The National Association for the Self-Employed awards up to $4,000 worth of grants for businesses annually (awarded quarterly). Established in 2006, it has awarded over $650,000 to its members.
Grant money can be used for expanding facilities, advertising, employee training and hiring, and other things necessary for business expansion. This grant program is only open to NASE members and dependents. So, you should apply before submitting your application if you are not a member yet.
What are the small business grant programs?
The government continues to support businesses as they struggle to face financial challenges. So, the federal government strives to assist starting and existing businesses through small business grant programs. These grants are classified into different categories, including:
Women-owned businesses’ small business grant program
In a world where women business owners are still underrepresented, government grants play a role in helping them advance their businesses. Grants from the SBA and other federal organizations are set aside for them. As early as 2010, over 20 billion dollars worth of federal grants were available for women.
Also, over $5 million women in the country start businesses annually; however, less than 15% of them apply for grants, leaving many unclaimed. You can check for these at Women’s Business Centers.
Minority-owned businesses’ small business grant program
Minority-owned businesses are more likely than other businesses to be owned by people of color and women, but there is a separate category for women-owned businesses. Also, they are controlled by members of racial or ethnic groups as presumed by the SBA, including:
- Hispanic Americans
- African Americans
- Native Americans
- Subcontinent Asian Americans
- Asian-Pacific Americans
In addition, the SBA’s 8(a) business development program supports minorities’ business growth through counseling, training workshops, technical assistance, and management.
Veteran-owned businesses’ small business grant program
Following a veteran’s exit from military service, the federal government sets aside 3% contracting dollars for veteran-owned small businesses. This is because it may be difficult for them to adjust and start their own business. They may also be eligible to purchase property from the federal government.
Eligible veterans must obtain their VOSB verification from the VA’s Center for Verification and Evaluation (CVE). In addition, military spouses are also eligible for the entrepreneurial training programs from the SBA offered to service members and veterans. They are for free and have many outlets in local communities in the country:
How to apply for small business grants?
Here are some grant application tips on how to secure grant opportunities you plan to acquire:
1. Get help from authorities
If you have no prior experience with grant applications and proposals, you can contact your local SBA district office and small business development centers for help. They provide free counseling to small businesses in all stages of growth, including forming relationships with grant agencies and contracting officers and writing grant proposals.
2. Research for applicable grants
Paying attention to the eligibility criteria is important when deciding which grant application to go for. The grant should match your business goals and mission. Also, take note of the deadlines because most federal agencies are very strict without any exemptions. The application process is time-consuming, so you should focus on pursuing grants you think you are confident of getting selected. Grants.gov provides the step-by-step process to find grants with a filtering feature to help you find available grants more easily.
3. Determine eligibility
The next step in applying for a business grant from the federal government is to determine eligibility. To become eligible small businesses, there are many factors to consider, including:
- Location in a specific geographical area
- Number of years in operation
- Annual revenue
- Specific employee count
4. Register with SAM
The System for Award Management (SAM) is a website where small business owners can register their businesses before submitting an application, which requires yearly renewal. Before registering with SAM, you must have an active UEID and TIN. You can also see information about the latest grant recipients on the SAM website, and Grants.gov uses it to establish the identification of online grant applicants.
4. Complete all the necessary documents
Grant-making agencies require a list of documents, which usually includes a business plan outlining how the money will be spent, products or services offered, the needed budget, financial statements, market demographics, and other paperwork. Failure to comply and complete the documents can lead to failure, denial, or delays.
5. Write a grant proposal
The proposal should include details on why the project is important and how it will benefit society. It needs special skills to write this, and it would be best to get help from a professional grant writer, a small business development center, or an SBA representative. The Grants.Gov mobile application allows you to search for grants, get tips and suggestions for grant writing, and know agencies’ policies.
What is grant fraud?
Federal grant fraud happens when a business or organization uses a federal grant illegally, such as by making false statements on their application or committing other fraudulent acts. Attempts to commit fraud against the government or any private grant programs are the following:
- Theft (using it for personal enrichment and financial gain)
- False claims
The Department of Justice Office of the Inspector General imposes the following consequences to grant recipient individuals, contractors and subcontractors, and business partners who plan to attempt federal grant fraud:
- Disqualification in receiving future financial awards
- Criminal and civil prosecution
- Recovering of funds