- Government grants are free federal, state and locally funded programs offered to help launch or grow small businesses.
- Only apply for grants that you are eligible for and can meet all the conditions of the grantor.
- Look to your local government for coronavirus-relief programs specific to your community.
- This article is for new or existing small business owners who want to secure a government grant to help them launch or grow their organizations.
Launching and expanding a small business is expensive, and there are several financial routes you can take to secure funding. For many small business owners, government grants are a desirable option. Several grants are provided by federal, state, and local governments to help small businesses launch, grow, and develop their companies. Learn what the best government grants in 2020 are, how to apply and five tips to help your business get one.
What is a small business grant?
A small business grant is essentially free money given to a small business owner to help them launch, develop or expand their organization. Grants, unlike a loan, do not have to be paid back, but they often come with restrictions on how the money can be spent.
Just because a grant is free money, doesn't mean it is easy to get. It takes a lot of time and preparation to apply for a grant, and they are highly competitive, so small businesses should only apply for grants they are eligible for.
Entrepreneurs and small business owners can seek a variety of grants, like private grants from corporations and government grants from federal, state, and local governments. Grants are also available for specific industries and demographics; for example, if you are a minority business owner, there are several minority-owned business grants specifically geared toward you.
Key takeaway: Small business grants are free money given to small businesses by private corporations or federal, state, or local government.
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Business grants vs. business loans
As discussed above, with a grant you do not have to repay the funds. However, if you have just launched your business or you're in the early startup phase, you may not be eligible for many grants. Another potential limitation with grants is that many grants have strict requirements concerning the grant application process and the grant proposal. If your application or proposal doesn't meet the specific requirements mandated by the agency, your request will be rejected.
If you're just starting out in business (two years or less) and it's unlikely that you will be awarded a grant, you may want to consider a business loan. One advantage of a business loan is that you can secure the capital you need to meet your needs, whereas with a grant, the amounts are fixed and may not sufficiently meet your company's needs. Another advantage is that some lenders may have more relaxed requirements, such as a lower minimum monthly income or lower minimum time in business.
Where to find business grants
Below is a list of some of the most robust resources for finding grants that can aid your business:
- SBA.gov is one of the top places to search for grants. The government site is filled with various grant and financing opportunities.
- Grants.gov is the ultimate database for federal grants. You can search for grants by funding type, eligibility, category (arts, business and commerce, health) and agency. Be forewarned: Sorting through the database will require some effort, but the potential payoff is that you may find a grant opportunity that is perfect for your company.
- The Economic Development Administration administers grants for economically depressed communities to stimulate new jobs and commercial growth.
- Similarly, Small Business Development Centers offer local resources that can help your business.
In the wake of the coronavirus, there are resources, including federal and private funding sources, that are helping businesses cope with the drastic economic contraction that is affecting the world.
- Economic Injury Disaster Loans are administered by the SBA and can provide businesses with working capital to pay employees, rent and other expenses.
- In addition to government loans, companies like Verizon have created funds that provide grants to small businesses.
Government grants for small businesses
Government grants are a desirable source of funding for many small businesses. Well-known sources for government grants include agencies like Grants.gov, Challenge.gov, the U.S. Small Business Administration (SBA), and the U.S. Economic Development Administration (EDA), but small businesses should look to every tier of the government (federal, state and local) to find the best grant for their business.
If this is a funding option you are considering, check out these government grants for small businesses.
Small Business Innovation Research and Small Business Technology Transfer programs (SBIR, STTR)
The SBIR and STTR programs are some of the best government grants available to for-profit small businesses innovating in science and technology. They are highly competitive and incentivize small businesses to conduct research and development, in hopes to eventually commercialize their product.
In addition to funding, these programs also offer opportunities for small businesses to work with nonprofit organizations. To be eligible, you must operate a U.S.-based small business that is more than 50% U.S.-citizen owned and has less than 500 employees.
These programs are broken down into three phases:
- Phase I: Award is between $50,000 and $250,000 for six months (SBIR) or one year (STTR). The objective is to determine technical merit, commercial potential and feasibility.
- Phase II: Award is generally $750,000 for two years (SBIR and STTR). The objective is to continue research and development efforts from Phase I.
- Phase III: Funding is not provided by SBIR or STTR programs. The objective is to pursue commercialization.
Visit the website to learn more about the SBIR and STTR program requirements and applications.
State Trade Expansion Program (STEP)
Small businesses seeking grant funding at the state level should consider STEP funding. STEP awards are given to state entities to increase exporters and sales in their state.
Small businesses can find STEP awardees in their state to access STEP resources and expand their global customer reach. STEP financial support helps small businesses learn how to export, participate in foreign trade missions, and design and develop products to attract foreign buyers.
Visit the SBA website to learn more about expanding your global reach.
Environmental Protection Agency grants
The EPA helps a variety of businesses, from small nonprofits to large state governments, by offering billions of dollars in grants and other assistance agreements. It's focused primarily on aiding in the development of human health and the environment. The EPA homepage features helpful guidance like available training and grant opportunities, application processes, and rules and policies.
Visit the website to see the EPA grant and training assistance available to you.
USDA Rural Business Development grants
If you are a small business (less than 50 workers and less than $1 million in gross revenue) operating in a rural area (population under 50,000), you may be a prime candidate for funding from a USDA Rural Business Development grant.
This grant is awarded to public entities (towns, communities, state agencies, nonprofits, etc.) to be used to benefit small and emerging businesses in rural communities that are based in industries such as land acquisition or development, pollution control and abatement, rural transportation improvement, and economic development.
The USDA also offers other rural grants, loans and loan guarantees. You can narrow your search based on your specific sector and state. From here, you will see details about each grant, including deadlines, funding amount, eligibility requirements and terms.
Visit the website to learn more about funding for rural business development.
U.S. Department of Education grants
Small businesses operating in the education industry can access grants offered by the U.S. Department of Education. It has dozens of grants for specific uses like scientific research, state education, special education and rehabilitation. Each grant lists program information like who is eligible to apply, total program funding, award ceilings and number of awards.
Visit the website to view and apply for education grants.
Service-Disabled Veteran-Owned Small Business (SDVO SBC) Program
The U.S. Small Business Association offers federal grants to service-disabled veteran small business owners through the Service-Disabled Veteran-Owned Small Business Program.
To qualify for the program, you must meet certain ownership and operational requirements. For example, your small business must be at least 51% owned and controlled by service-disabled veteran(s), and you must have one or more service-disabled veterans who make day-to-day and long-term decisions. As a member of the SDVO SBC Program, you will be eligible to compete for set-aside contracts.
Visit the website to learn about SDVO SBC Program benefits and requirements.
Funding for small businesses impacted by COVID-19
If your business is facing financial distress due to the coronavirus pandemic, securing a general government grant is not your only financing option. For example, the SBA is offering additional relief funding specifically to those impacted by the pandemic.
These funding options include the following:
- The Paycheck Protection Program
- Economic Injury Disaster Loans
- SBA Express Bridge Loans
- SBA Debt Relief
Additionally, said Ty Stewart, CEO and president of Simple Life Insure, "Many states are currently offering relief programs and alternative short-term funding opportunities to hard-hit businesses. Your chance of finding fitting opportunities increases the more local that search is, so try to prioritize ones available in your county or state."
To give you an idea of what type of local relief may be offered in your area, Ryan Pitylak, chief marketing officer and founder of ZenBusiness, listed several local grant examples, including:
- The Save Small Business Fund
- The Michigan Small Business Relief Program
- Minnesota DEED Small Business Relief Grants
- The NYC Small Business Continuity Loan Program
- The Seattle Business Stabilization Fund
Although a smaller number of businesses are eligible for local funding programs like these, they are still highly competitive. If you want to apply for a local COVID-19 relief program that has already allocated all of its current funding, check the details to see if they anticipate providing another round of aid.
Key takeaway: If your small business was impacted by the pandemic, search for local grants that are available to businesses in your specific county or state.
How to know if your business is eligible for a grant
Applying for a business grant is a long and involved process, so it is important that you only apply for the ones you are eligible for. To narrow down your search to a select few grants, carefully check the details and deadlines of each grant you are considering. If you meet the general business criteria, take it one step further and ensure your goals align with those of the government grantor.
"Businesses need to be aware of the problem they are going to solve using the grant," said Will Ward, CEO of Assistive Listening HQ. "It should be double-checked if solving this particular problem is part of the goals of the government entity giving the funds."
Ward also recommended researching similar problems that are being solved by other companies and the amount invested, as this knowledge will help you prove eligibility in securing the grant. Once you find a grant that aligns with your company goals, the next step of eligibility is to verify that you will be able to meet the grantor's required conditions.
Key takeaway: To be eligible for a grant, your business goals must align with the grantor's goals, and you must fulfill all required details and conditions.
How to apply for (and get) a government grant
It is not easy to secure a government grant. Although grants are technically free money, you want to put a lot of time and energy into ensuring your application is as good as possible; this will give your business the best chance at securing a grant and receiving funding.
"A great chunk of time will have to be allowed to put together all of the paperwork and make the grant application," said Pitylak. "You're advised to perform a cost-benefit analysis to find out whether it's worth your while."
Securing a government grant is just like securing any other grant. You will first need to spend a considerable amount of time gathering your application materials (business plan, business records, administrative details, funding objective, etc.) Next, you want to clearly define what type of grants you are eligible for and carefully read through grant requirements to select a few that directly apply to your business. You may want to meet with the funding source before applying.
After you write and submit your grant proposal (or hire a grant writer to do it for you), the last thing to do is wait. Unless the grant has application tracking or next-steps listed, wait at least three to six months before following up.
Applying for a government grant is one thing, but how do you get the grant? We spoke with established business leaders to learn five tips for securing a grant.
- Create a professional resume. "It's worth taking the time to create a professional 'resume,' giving answers to questions that are bound to be asked when deciding the suitability of your business," said "You should specify the amount of time that you have been in business, monthly revenue and expected uses of the grant money. It would also be worth attaching a professional photo and business plan."
- Partner with a large local organization. "Start by researching large corporations or brands headquartered in your area that maintain a corporate social responsibility strategy," said Stewart. "Businesses often support grant programs and partnerships to help develop the communities where they're located, especially around regional or worldwide headquarters. They have a vested interest in keeping those communities thriving, including helping out relevant small businesses."
- Connect with your city's or county's economic development council. "This branch of government often aggregates a continual list of grant opportunities," said Stewart. "Having a working relationship with economic development council staff or members can help you stay in the loop on these grants as well as elevate your business' visibility in your community, which will help come application time."
- Use your digital assets. "Businesses should also focus on digital assets like social media handles and websites, along with other physical assets," said Ward. "The digital assets act as the face of the company and should give a good first impression when people search for it."
- Think outside the box. "It is important for small businesses to stand out from the rest of the other grant applications," said Ward. "Business owners should think creatively and do out-of-the-box ideas to impress the people in charge. Something as simple as a light-hearted video explaining why your business plan is worth investing on can do the trick."
Key takeaway: Secure a grant through unique strategies like creating a professional resume, connecting with local corporations and local economic development councils, highlighting digital assets, and getting creative on applications.