A grant can provide free money for startups, but it may not be as plentiful or easy to obtain as one might think. To secure free money, it’s crucial to understand the criteria for these grants and determine if your business or industry qualifies. By knowing where to look and applying, you can secure the necessary funding for your startup. In this article, we will look at what a grant is, the different types of grants for small businesses, and how to qualify for one.
What Is a Grant?
A grant is a financial award given by an entity to an individual or company to facilitate a goal or incentivize performance. Grants can include education loans, research money, and stock options. Some grants have waiting periods, called lock-up or vesting periods before the grantee can take full ownership.
For businesses, grants often involve awarding stock options to employees to elicit loyalty and incentivize strong job performance. After the waiting period, employees can exercise these options and take positions in the stock, often at a lower market value.
Note that:
- A grant is a non-returnable gift, such as research money, education loans, or stock options, given to an individual or company.
- Qualified stock option grants offer favorable tax treatment but cannot be passed on unless in a will or trust.
- Non-qualified grants can be passed on to children or charities, but they are taxed at the time of purchase.
What Is a Startup Small Business Grant?
A startup small business grant is monetary funding provided by the government or organization to help small companies and nonprofits succeed in building and growing their businesses. It is non-returnable, with no collateral required, fees, or interest. The money is yours to keep, and you won’t have to pay it back after using it.
However, there might be restrictions on how grant money can be used. If the grant is used to advance technology, for instance, using it to cover team expenditures or equipment may result in repayment.
Additionally, fraud may also be present, which could result in legal problems. If you are awarded a startup grant, it is imperative that you adhere to the funder’s reporting and accounting requirements and use the funds for the grant’s intended purposes.
Who Qualifies for a Startup Small Business Grant?
Government startup small business grants are not available for starting, debt repayment, or operational expenses. Unless nonprofit or related, government grants may be difficult to find. However, there are grants for specific business types and owners.
The following business types and owners may be eligible for startup small business grants:
- Innovators
- Green businesses
- Rural businesses
- Women, veterans, or minority-owned businesses
- Nonprofit organizations
Searching for startup small business grants may not provide a complete list, but visiting specific websites and organizations can help find grants for small businesses such as those listed below.
- Grants.gov
- SBIR.gov
- Small Business Development Centers
- USDA Rural Business Development Grants
- National Association for the Self-Employed (NASE)
- FedEx Small Business Grant Contest
- Minority Business Development Agency (MBDA)
- Asian Women’s Giving Circle
Types of Government Grants for Small Businesses
Both federal grants and regional grant programs come in a huge variety.
#1. Grants.gov:
All small businesses should start by searching for federal grants there. Therefore, you can narrow down the results to those grants that you stand a good chance of winning using the database’s powerful filters, which contain millions of grants, such as small business grants.
#2. Small Business Administration (SBA) Grants:
The SBA primarily assists small businesses in locating traditional funding sources, like small business loans. However, there are a few small business grant services available that are specifically geared toward businesses engaged in research or exporting.
#3. Small Business Innovation Research (SBIR):
A well-established source of funding for research-based companies with the potential for commercialization is SBIR. Through 12 major federal agencies, they distribute grants to:
- Department of Agriculture
- National Institute of Standards and Technology
- National Oceanic and Atmospheric Administration
- Department of Defense
- Department of Education
- Department of Energy
- Department of Health and Human Services
- Department of Homeland Security
- Department of Transportation
- Environmental Protection Agency (EPA)
- National Aeronautics and Space Administration (NASA)
- National Science Foundation
#4. Small Business Technology Transfer Program (STTR):
The STTR program is comparable to SBIR. Additionally, it also emphasizes companies that are associated with research programs, but it is only accessible to those who are based at recognized research institutions. Since only five federal agencies currently give out STTR grants, it is also more restrictive in terms of industry.
- Department of Defense
- Department of Energy
- Department of Health and Human Services
- NASA
- National Science Foundation.
#5. State Trade Expansion Program (STEP):
Through this program, exporting small businesses are given grants. However, there isn’t a lot of information about this small business grant online, so you’ll need to get in touch with the SBA’s Office of International Trade to find out if you qualify for it.
#6. SAM.gov (formerly the Catalog of Federal Domestic Assistance):
This federal database offers a modern redesign and unique pointers, with advanced search filters for grant recipients and small business loans. It overlaps with Grants.gov but offers valuable information.
#7. Challenge.gov:
Although this isn’t technically a website that offers small business grants, the scheme does offer sizable cash prizes for resolving problems faced by different industries. There are non-tech challenges as well as those that involve technology. Keep tabs on challenge.gov for key challenges that might be simple for your small business to succeed if you’re engaged in an innovative endeavor.
#8. USDA Grants:
You may have a good chance of receiving a grant from the USDA if your company provides agricultural or food services. There are seven small business grant programs available:
- Community Connect Grants
- Distance Learning and Telemedicine Grants
- Rural Business Development Grants
- Rural Energy for America Program: Renewable Energy Systems and Energy Efficiency
- Single Family Housing Repair Loans & Grants
- Socially-Disadvantaged Groups Grant
- Value-Added Producer Grants
Generally, small rural businesses are the focus of some USDA grants, but not all of them.
#9. National Institute of Standards and Technology (NIST) Grants:
Here is a list of grants that NIST has received. They are designed for startups in all areas of science and technology. Additionally, the grants that are currently open can be found here or at Grants.gov.
#10. The National Institute of Health:
Businesses conducting COVID-19-related biomedical research have access to a wide range of financing and grant opportunities from the National Institutes of Health.
#11. The US Department of Commerce Minority Business Development Agency (MBDA):
This offers a wide range of small business programs designed to support the expansion and growth of minority-owned businesses across the United States.
#12. The US Department of Agriculture’s Rural Connectivity Program:
This program provides federal small business grants to organizations and initiatives that support rural communities, especially those that are underserved, or that work to lessen the effects of climate change there.
#13. Department of Education Grants:
The Department of Education keeps a current list of the numerous grants it provides to startups in the field of education. Additionally, if you are the owner of a business that deals with education, you should keep an eye on these grants because many of them have award ceilings of up to a million dollars.
#14. EPA Grants:
Numerous grants are available from the EPA to small companies working to protect the environment, especially those using creative approaches. Grants are available for improving water quality, the environment, air quality, and other areas.
#15. Economic Development Administration (EDA):
Small businesses seeking to enhance community infrastructure are given grants by the EDA. The only drawback is that there needs to be a simple directory of grants that can be followed. Therefore, you must frequently check their page (eda.gov) for updates. By looking at previous opportunities on this page, you can determine whether your business is relevant.
How to Apply for a Small Business Grant for Your Startup
Startup small business grants can be challenging to obtain, but there are steps you can take to increase your chances.
- Gather all necessary information before applying, including the application requirements, due date, and any additional information.
- Consult with experts like accountants or team members, and follow grant application parameters to avoid rejection.
- Attend workshops or conferences to learn about the grant process and connect with grant writers and funders.
How Do I Know If A Grant Is Legitimate?
To spot a grant scam, follow these five steps:
1) Have you applied for a grant? Legitimate grants are usually free, so if you receive a grant you don’t know about, it’s likely a scam.
2) Is there a fee involved? Grant applications are usually free, but if you’re asked to submit a fee, it’s likely a scam.
3) Is the grant for business or personal use? Grants for businesses or nonprofits are for the company’s sole benefit, not personal expenses.
4) The issuer’s agency should be legitimate, not the Federal Grants Administration.
5) If you’re asked for personal or company information, ask for the proposal in writing, as chances are you won’t hear from them again.
What Is The Most Common Grant?
Program or project grants are the most common type of grant, limiting funding to support specific programs or projects. They are restrictive in terms of administrative costs but straightforward and easier to write, allowing organizations to stick to their program parameters.
Additionally, this type of grant is ideal for environmental organizations focusing on pollution prevention.
What Is The Easiest SBA Loan To Get?
With this term loan or line of credit, you can get fixed or variable SBA loan rates, the quickest approval times, the most flexible terms, and lower down payments than with conventional loans.
Can I Get A Business Loan Without Revenue?
Loans for new businesses can be obtained even without any revenue, profits, cash flow, or assets. However, obtaining a business loan without a revenue source doesn’t necessarily mean it’s the best choice.
How Much Do SBA Loans Pay?
Small Business Administration (SBA) loans pay a range of amounts, depending on the loan program, business size, and borrower’s financial situation. Popular programs include the 7(a) loan program and the microloan program. Loans can be used for working capital, equipment purchases, real estate acquisitions, and debt refinancing.
Thereafter, the lender evaluates the borrower’s creditworthiness, financial history, and repayment ability. SBA loans typically require collateral, a personal guarantee, and additional fees and interest rates.
How Much Money Do You Need For A SBA?
When applying for an SBA 7(a) loan, business owners should be prepared to put down 10% to 30% of the loan amount. Higher down payments are frequently needed for businesses with poor cash flows or low-value collateral.
What Is The Maximum SBA Loan Amount?
The most common SBA loan product is the 7(a) loan. These loans have a $5 million maximum loan amount and are backed by federal government term loans. Business owners frequently use SBA 7(a) loans to fund working capital requirements, buy an already-existing company, restructure debt, or buy new machinery.
Are There Grants For Small Business Startups?
- The Comcast RISE Investment Fund provides funding for independently owned businesses.
- Patagonia supports climate change and environmental injustice.
- The National Association for the Self-Employed offers growth grants
- The 500 Global Flagship Accelerator program, the Halstead Grant
- The StartOut Founders Program and the StreetShares Foundation support veteran-owned businesses.
Overall, these programs aim to promote innovation, support LGBT-owned businesses, and provide resources for social change within the military community.
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