- Government grants are free federal, state and locally funded programs to help launch or grow small businesses.
- Only apply for grants for which you are eligible and ensure you meet all the grantor’s conditions.
- Increase your grant approval chances by perfecting your resume, working with a prominent local organization or consulting your city or county economic development council.
- This article is for entrepreneurs and small business owners hoping to secure a government grant to help launch or grow their organizations.
Launching or expanding a small business can be expensive, and you can take several financial routes to secure funding. For many small business owners, government grants are desirable. Federal, state and local governments offer various grants to help small businesses launch, grow and develop. We’ll explore the best government grants, explain how to apply and share tips to help your business secure grant funding.
What is a small business grant?
A small business grant is essentially free money given to entrepreneurs or small business owners to help them start a business or expand their organization. Unlike loans, you don’t have to pay grants back. However, they often come with restrictions on how you can spend the money.
Grants may be free money but they’re not easy to secure. Applying for a grant takes time and preparation. They’re also highly competitive, so small businesses should only apply for grants for which they’re eligible.
Editor’s note: Looking for the right loan for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.
Small businesses can seek various grants, including private grants from corporations and grants from federal, state and local governments. Grants are also available for specific industries and demographics. For example, minority business owners can seek specific minority-owned business grants.
If grants don’t work out, your business has many funding options, including microfinancing and alternative financing options like personal savings, credit cards, crowdfunding, loans from friends and family, peer-to-peer lending and merchant cash advances.
Business grants vs. business loans
Grants and loans are both ways to fund your business. Here’s how they compare:
- Grants: Grants are desirable because you don’t have to repay them. However, not everyone will be eligible for grants. For example, if you’re just starting out in business (two years or fewer), it’s unlikely you’ll be awarded a grant. Additionally, the grant application and proposal process often has strict requirements. If you don’t meet specific requirements, the agency will reject your request.
- Loans: If grants aren’t an option, you may choose a small business loan to fund your company. Loans are also an easier funding option if you must bankroll your business while in personal debt. The best business loans will help you secure enough capital to meet your needs. In contrast, grant amounts are fixed and may not be sufficient. Additionally, some lenders may have more relaxed requirements, such as a lower minimum monthly income or lower minimum time in business.
Where can you find government grants for small businesses?
Government grants are a desirable source of funding for many small businesses. You can find government grants via the following resources:
- SBA.gov: SBA.gov is one of the top places to search for grants. The government site is filled with various grant and financing opportunities. The Small Business Administration (SBA) also offers SBA loans that differ from conventional loans in crucial ways.
- Grants.gov: Grants.gov is the ultimate database for federal grants. You can search for grants by funding type, eligibility, category ― arts, business and commerce and health ― and agency. Be forewarned: Sorting through the database will require some effort. However, the potential payoff is finding a grant opportunity perfect for your company.
- United States Economic Development Administration (EDA): The EDA administers grants for economically depressed communities to stimulate new jobs and commercial growth.
- Small Business Development Centers: The SBA’s Small Business Development Centers offer local resources to help your business.
- Challenge.gov: Challenge.gov hosts challenges and prize competitions designed to fund organizations with innovative solutions to pressing issues.
These aren’t the only government grant resources. Businesses should explore every governmental tier ― federal, state and local ― to find the best grants.
What are some government grants to explore?
Here are some well-known government grants for which your business may be eligible.
1. Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs
The SBIR and STTR programs are some of the best government grants available to for-profit small businesses specializing in science and technology innovation. They are highly competitive and incentivize small businesses to conduct research and development in the hopes of eventually commercializing their product. In addition to funding, these programs also offer opportunities for small businesses to work with nonprofit organizations.
To be eligible for the SBIR and STTR programs, you must operate a U.S.-based small business that is more than 50 percent U.S.-citizen owned and has fewer than 500 employees.
These programs have 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 SBIR.gov to learn more about SBIR and STTR program requirements and applications.
The SBIR and STTR programs aim to turn knowledge into money by stimulating tech innovation in the private sector with seed money for high-risk, high-reward ventures.
2. State Trade Expansion Program (STEP) grant
Small businesses seeking grant funding at the state level should consider STEP funding, an SBA small business grant. 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 STEP information page on the SBA website to learn more about this program for expanding your global reach.
3. Environmental Protection Agency (EPA) grants
The EPA helps many 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 the development of human health and the environment. The EPA home page features helpful guidance like available training and grant opportunities, application processes and rules and policies.
Visit the EPA grants website to see the EPA grant and training assistance available to you.
If you make sustainability part of your business model, you can enact change while showing customers you care about the environment.
4. U.S. Department of Agriculture (USDA) Rural Business Development grants
If you’re a small business (fewer 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, such as towns, communities, state agencies and nonprofits, to benefit small and emerging businesses in rural communities based in industries like 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 state. Visit the Rural Business Development Grants website to learn more.
5. 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 and special education. Each grant lists program information like who is eligible to apply, total program funding, award ceilings and number of awards.
Visit the U.S. Department of Education website to view and apply for education grants.
6. Service-Disabled Veteran-Owned Small Business (SDVO SBC) program
The SBA 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 percent owned and controlled by service-disabled veterans, 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 Veteran Contracting Assistance Programs website to learn about SDVO SBC Program benefits and requirements.
Veteran-owned businesses can also explore small business loans for veterans and other resources for veteran-owned businesses.
How do you know if your business is eligible for a government grant?
Applying for a business grant is a long and involved process, so it’s crucial to apply only for the ones you’re eligible for. To narrow your search to a select few grants, carefully check the details and deadlines of each grant you consider. If you meet the general business criteria, take it a step further and ensure your goals align with the government grantor’s goals.
“Businesses need to be aware of the problem they are going to solve using the grant,” advised 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 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 eligibility step is to verify that you can meet the grantor’s required conditions.
How do you apply for a government grant?
Securing a government grant isn’t easy. Although grants are technically free money, you must put time and energy into ensuring your application is as good as possible. You want to give your business the best chance of 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,” noted Ryan Pitylak, chief marketing officer and founder of ZenBusiness. “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:
- Gather your grant application materials: You must spend a considerable amount of time gathering your application materials, such as business plan, business records, administrative details and funding objective.
- Apply for the right grants. Next, you must define what grant types you’re eligible for and carefully read through grant requirements to select a few that directly apply to your business. Consider meeting with the funding source before applying.
- Submit your grant. 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.
What are tips for securing a government grant?
Applying for a government grant is one thing, but how do you get the grant? Here are five tips for securing a grant:
- Create a professional resume: You may benefit from hiring an expert to make your resume stand out and look more professional. This enhanced resume should include the answers to any questions the funding agency might ask as they review your application. It should also clearly state how long you’ve been in business, how much your business earns monthly and how you’ll use the funding. Additionally, a business plan and professional photo are must-have items.
- Partner with a large local organization: Consider partnering with a prominent local organization. “Start by researching large corporations or brands headquartered in your area that maintain a corporate social responsibility strategy,” advised Ty Stewart, CEO of Simple Life Insure. “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: Your local region may have an economic development council. “This branch of government often aggregates a continual list of grant opportunities,” Stewart explained. “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: Ensure your digital assets, including social media accounts, are as strong as possible. “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: Consider ways to separate yourself from the competition. “It is important for small businesses to stand out from the rest of the other grant applications,” Ward advised. “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 [in] can do the trick.”
Ensure your business plan answers essential questions like what your organization’s competitive advantage is, if your business is in a growth market, if there’s customer demand for your offering and how you’ll staff the business.
Small business funding, right from the government
Where small business loans typically come from privately owned companies, government grants are free money from federal, state and local agencies. This immediately puts a reputable name to your funding, though it does ― as is standard for government procedures ― introduce lots of paperwork. With the help of grant application experts on your side, this paperwork can feel more like a hill than a mountain. On the other side might lie exactly the funding your business needs.
Max Freedman contributed to this article. Source interviews were conducted for a previous version of this article.