“Can I get a government grant to finance my business?”
This is one of the most commonly asked questions posted by entrepreneurs and owners of young businesses in the SBA Community. And, in most cases, the answer is “no.” However, some small businesses, particularly those engaged in “high-tech” innovation or scientific research and development, can benefit from government grants.
Here are some facts about government grants for small businesses, including who is eligible and how you can go about finding them:
Can I Get a Government Grant to Start a Business?
No doubt you’ve seen ads purporting to offer access to “free money” to start your business. While it’s not unreasonable to expect that the government may provide grants to small businesses, it’s wise to take most of these claims with a grain of salt. Why? The fact is, government grants are funded by tax dollars, and, as such, there are very stringent rules about how that money is spent.
In short, despite what you may have heard in obscure ads or late night TV infomercials, federal and state governments don’t provide grants for any of the following:
- Starting a business
- Paying off debt
- Covering operational expenses
That being said, there are certain types of grants available. However, these are limited to specific industries and causes, such as scientific and medical research and (more on this below).
Your state government is another source of potential grants, often known as “discretionary incentive grants.” Again, these are closely tied to government objectives and tend to be restricted to larger employers or have strict eligibility requirements that often exclude small businesses.
Small Businesses May Qualify for Research and Development (R&D) Grants
One business venture that does attract government grant funding is scientific research and development. Federal initiatives, like the Small Business Innovation Research (SBIR) program, award grants to hi-tech small businesses or startups to carry out R&D and bring innovative technological products to market. Companies like Symantec, Qualcomm and ViaSat all got a step up thanks to the SBIR program.
How to Find Grants
If you think you might be eligible for a government grant or aren’t sure about the validity of some of the claims you hear in the media, check out Grants.gov. This is a searchable directory of more than 1,000 federal grant programs. Use the Advanced Search tool to search for a grant by eligibility (e.g., for-profits or small business), by issuing agency, or category (e.g., environment or science and technology).
The Bottom Line
The truth is that for most entrepreneurs, starting a business needn’t break the bank. The latest data from the SBA Office of Advocacy shows that up to 40 percent of startups get established with very little financing, often less than $5,000, while up to 25 percent don’t use any startup financing at all.
So before you get pulled down the rabbit hole of “free money”, assess your funding needs. This includes your capital assets like a laptop, printer, web hosting costs, office space or inventory stock – as well as the amount of cash flow you need to keep you afloat until your business is meeting your revenue goals and you are making a profit.
If you think you’ll need financing at some point, be sure to fully develop and test your product or offering so that it’s as complete and ready-for-market as it can be before marketing it or seeking financing.
COMMENTARY: Obtaining a grant can be a challenging, frustrating and laborious task, but it can also be very rewarding if you follow the proper procedures, complete the grant proposal and all the required paperwork, provide all the required information and meet the applications deadlines.
U.S. Government Grants
If you are applying for a U.S. government grant checkout Grants.gov. Grants.gov is your key source to FIND and APPLY for federal grants. The U.S. Department of Health and Human Services is proud to be the managing partner for Grants.gov, an initiative that is having an unparalleled impact on the grant community. Learn more about Grants.gov and determine if you are eligible for grant opportunities offered on this site. Here are some valuable links to the Most Common Grants and Government Grant Resources to get you started.
Most Common U.S. Government Grants
Small Business Grants
Grants For Women
Grants For Teachers
Single Mother Grants
U.S. Government Grant Resources
Applicant User Guide
Organization Registration User Guide
Individual Registration User Guide
Find and Apply for Grant Opportunities
Track Your Application Package
Life of Grants Application Package
Government Grants Customer Service Process
Government Grants Overview Presentation
Foreign Registrant Guide
Organization Registration Checklist
E-Biz POC Registration Checklist
Grants Overview Brochure
Grants Brochure Request Form
Grants Presentation Request Form
Find and Apply Presentation Slides
2010-2011 FAFSA on the Web Worksheet (color) in PDF
Finding Grant Opportunities Tutorial
Organization Registration Overview
Individual Registration Overview
Completing an Application
Private Foundation Grants
If you would like to apply for a private foundation grant (non federal government), I highly recommend The Foundation Center.
Established in 1956, the Foundation Center is the leading source of information about philanthropy worldwide. Through data, analysis, and training, it connects people who want to change the world to the resources they need to succeed. The Center maintains the most comprehensive database on U.S. and, increasingly, global grantmakers and their grants — a robust, accessible knowledge bank for the sector. It also operates research, education, and training programs designed to advance knowledge of philanthropy at every level. Thousands of people visit the Center's web site each day and are served in its five regional library/learning centers and its network of more than 450 funding information centers located in public libraries, community foundations, and educational institutions nationwide and around the world. To get started click HERE.
Foundation Grants by State
If you would like to apply for a foundation grant in your State, I highly recommend Grant Space, a service of the Foundation Center.
- How to location a foundation grant in your home State - Though some foundations give nationally or internationally, most foundations give within their own local area. Often, it may not be where a foundation is located, but where they give, that is important. For resources on finding funders based on where they give to, please see our Knowledge Base article How do I find foundation grants for my nonprofit? Whether you are conducting prospect research, or are just interested in foundations in your area, the following resources allow you to identify foundations by where they are located:
- The Foundation Directory Online allows you to perform online searches on current grantmakers. Use your state as a term in the "Grantmaker State" field. The Foundation Directory Online is available for free access at all Center libraries and in hundreds of our Cooperating Collections nationwide.
- You might also check the Community Foundation Locator, sponsored and maintained by the Council on Foundations, to see whether there is a community foundation serving your local area.
- Grant Source also offers these free online resources:
- Foundation Finder: Search by name, city, state, ZIP, or EIN to get contact details and links to recent 990s.
- Foundations Respond to the Economic Crisis: Click on a state, then continue drilling down by county, city, ZIP, or Congressional district to see grant recipients and details, which include links to basic funder profiles.
- Requests for Proposals (RFPs): Announcements of funding opportunities. Also available as an RSS feed or free weekly e-newsletter.
Hiring A Professional Grant Consultant
Applying for a government or private foundation grant can be very frustrating, full of red tape and requiring a considerable investment in time. In order to avoid potential problems, I highly recommend that you hire an experienced professional grant consultant from the Grant Professionals Association. Make sure that you speak with each professional grant consultant, obtain a list of references you can check, obtain an itemized written proposal detailing the services to be performed and cost for each. Obtain at least three competitive proposals before making a final decision. If possible, work with a professional grant consultant near your place of residence.
CAUTION: There are number of scrupulous individuals who purport to be experts in how to obtain government and private foundation grants. They charge substantial fees for preparing a grant proposal and completing the required grant application and paperwork, but often produce very little in the way of results for their efforts. Always obtain a list of references that you can check and refer to the Better Business Bureau in the state where each consultant is located to determine if there have been any complaints about that consultant.
I hope you have found the above information helpful in identifying grants that you may qualify for, and provided you with the necessary information required to apply for those grants. Good luck finding your grant.
Courtesy of an article dated June 5, 2012 appearing in Small Business Trends