- Grants are an excellent avenue for small business funding that can help you hit a specific goal or complete a certain project.
- Grants are often pointed, detailed and tailored to a specific industry or ownership structure.
- Grant applications usually require multiple pieces of information as part of the proposal, a critical step that should be followed carefully.
- This article is for small business owners considering applying for grants.
While it might seem like nothing in this world is free, that isn’t necessarily the case when it comes to business grants. This funding source is essentially free money — you don’t have to repay it. But there’s a catch: The process of applying for and acquiring a grant is often lengthy and challenging.
Still, obtaining a grant could help you launch a new business during tough economic times or take on a specific project. If you think a grant may benefit your company, it’s crucial to fully understand which entities offer them and how to apply for one. Below is a guide to maximizing the chances of your grant application getting approved.
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What is a business grant?
Business grants are sums of money given by a foundation, government body or other entity to help businesses get started or grow their operations. Grants typically are desirable because they don’t have the same conditions as other financing options. Specifically, grants don’t need to be paid back like loans do, and business owners don’t need to give up equity in exchange for the grant.
Where to find business grants
While there are numerous options for business grants, they all come from one of three sources.
Grants can come from agencies on the federal or state level or a local government. These grants have the narrowest eligibility rules and are usually only provided to businesses rooted in science, technology, agriculture, energy or other industries that will bring direct growth to the community. [Learn how to get a government grant for your business.]
These grants primarily focus on specific underrepresented demographics, such as women entrepreneurs, veteran proprietors and business owners of various racial and ethnic backgrounds.
These come from institutions like banks and have the broadest eligibility criteria. These grants are given based on merit and application materials, such as essays.
Grants typically are awarded by federal and state government agencies, not-for-profit organizations and for-profit enterprises.
What to do before applying for a small business grant
Preparation is key when it comes to grant applications. Since applying for a grant is time-consuming, there are several steps you should take to prepare properly for your application and simplify the process:
- Define the funding: Business owners should outline the specific funding needed and identify the precise objectives a grant will help them achieve.
- Create a detailed business plan: The next step is creating a business plan. Your plan should include essential details about your business, such as a company description, the business structure, services offered, financial projections and other useful information.
- Compile administrative details: You should gather other vital details, such as the business owner’s contact information, planned use for the grant money, business license number, the business’ tax identification number or employer identification number and revenue vs. profit history and projections.
- Gather business records: Business owners should also assemble all the necessary business records, ideally from at least the last three years.
There are several additional steps businesses should take to ensure they are properly prepared for the application progress.
- Get an expert opinion: It’s helpful for business owners to have their business plans and records reviewed by experts, whether that individual is a SCORE mentor or someone with experience guiding business owners through the grant-hunting process.
- Hire a grant writer: Grant writers typically have expertise in different grant submission processes and work within industry verticals. They can help you craft a comprehensive and compelling proposal.
- Achieve nonprofit 501(c)(3) status: This status is extremely helpful when seeking a nonprofit grant because it identifies your business as a legitimate nonprofit.
- Look for applicable tax-exempt status paperwork: If your business is eligible, this type of paperwork can sometimes increase your odds of receiving funding.
How to apply for a business grant
The first step in applying for a grant is to identify what type of grant your specific business is likely to receive. Companies in certain industries like eco-friendly sectors or owned by underserved demographics, such as veteran-owned businesses, may have better luck qualifying for particular grants. Start your search by looking for local grant providers and then expand nationally to see what’s available.
After you’ve determined what type of grants are achievable for your business, carefully read through the grant requirements and narrow it down to a few select grants. Before writing your proposal, consider meeting with the funding source, if possible. This is an opportunity to discuss your idea and get feedback before formally applying.
The importance of a business grant proposal
After conducting research and contacting the funder, the next step is to write the grant proposal. This part is critical and deserves a lot of attention as the purpose of your proposal is to demonstrate your worth.
You want to convey to the grant provider how the service you’re seeking funding for will help solve an existing problem in society. Establish credibility by detailing your organization’s history and crafting a narrative that reflects how receiving the grant will make a difference. It’s crucial to make a compelling case as to why you should receive the grant and what it will be used for.
What’s included in a business grant proposal
Business grant proposals typically include the following sections:
- Cover letter: This document is the first impression the grant reviewer will have of your application. It should contain a summary of your proposal and why you stand apart from other applicants.
- Executive summary: This provides a top-level summary of the main aspects of your business and the core components of your grant proposal.
- Basic company information: Include basic information about your business, including other sources of funding and your annual budget. You should also include information on your organization’s executive officers and governing structure.
- Need statement: Grant reviewers need to know why you’re seeking this funding and that you’re addressing an important need with the grant money. Your need statement should summarize the facts, figures and data your grant reviewer needs to make the decision on whether to approve your application.
- Purpose: Whether you’re looking to purchase specialized equipment, hire more staff or cover travel expenses related to your business, specify how the funding will be used.
- Evaluation: Let the grant reviewer know which data you plan to track to best determine the impact of their funding.
- Budget: Detail how much it would cost to complete the project for which you are seeking funding. Remember, grants are often for specific purposes and needs, so this information is key. If you’re expecting other sources of financing, those should be mentioned as well.
- Documentation: Your grant reviewer may want to see financial statements, tax-exempt letters if you’re a not-for-profit organization and other important information that could bolster your chances of receiving the grant.
Once you’ve written and submitted your grant, the last thing to do is wait. Check the grant submission guidelines to see the funder’s approval/rejection process as sometimes this will provide a time frame or a series of next steps for you to take. Some funders even provide a tracking number, so you can see the status of your grant proposal.
You typically will be notified when your proposal is pending and when your proposal is approved or rejected. If you aren’t able to find submission guidelines or tracking information, wait at least three to six months before following up.
[Do you want to consider other financing options? Read our reviews of the best loan providers for small businesses.]
Common grant application mistakes
While knowing what to do when applying for a grant is critical, knowing what not to do is equally important. You must avoid falling prey to common application mistakes.
For example, a seemingly innocent but very common mistake is overapplying. When business owners apply for too many grants at one time, they decrease their chances of getting one due to reduced time and quality spent on each application. Instead, focus on applying for one or two grants that you’re likely to win.
Many business owners also make the mistake of being too general or unoriginal in their proposals. They describe their mission statement in vague terms instead of listing specific solutions for how they can satisfy the funder’s interests. Your proposal should explain the unique way in which this particular grant will help achieve your shared objectives.
Another frequent mistake business owners make during this process is not following directions. Grant suppliers are looking to see if you meet a very specific set of criteria, so following directions is an absolute must. Do not provide more information than requested and ensure you’ve followed every instruction to the letter, including the submission deadline. [Check out the signs you’re not ready to pitch investors.]
Whether choosing a business loan or grant provider, you’ll be expected to identify what you plan on using the funds for. Your answer will have a big impact on whether your request is approved.
Requirements after you receive the grant
Occasionally you may find a grant that comes with no strings attached, but this is uncommon. Once you receive a grant, you are accountable for following the guidelines set forth by the grant provider. For instance, most funders require you to provide progress reports so they can track the impacts of their funding over time.
The requirements for maintaining a grant are something you should be aware of ahead of time, although they are usually not too difficult to manage. Once you establish an agreement between the grant funder and yourself, you’ll be set to move forward with your business or project.
Finding the funding you need
Although grant applications are known to be time-consuming and tedious, the result if you’re approved is free money. That prospect alone can make it well worth your while to hire a grant writer whose expertise can maximize your chances of approval. You should task this grant writer with one grant application at a time; applying to too many grants is a known cause of declined applications. Patience and expertise may well be your best bet for grant approval ― the least financially stressful funding you can obtain.
Max Freedman and Stella Morrison contributed to this article.