Have you made the decision to open your own business? If so, congratulations on taking the first step. Once you’ve either found a business to buy or decided what type of business you’d like to start, you have to find a way to pay for it. Finding funding for your small business is no easy task. Unless you happen to be independently wealthy, you’ll likely require some help to get your ideas off the ground.
There are a wealth of available funding sources. The pros and cons of each option vary, but all-in-all, you should have no problem finding the method that works for your situation.
If you’ve ruled out borrowing from family and friends, finding investors, or applying for a loan to cover all the costs of your business startup, you can apply for a small business grant. In this comprehensive guide to small business grants, you’ll learn whether your business is eligible for a small business grant and where to find one.
What Are Small Business Grants?
Small business grants are a way to fund your startup business for free. If you don’t want to take out a loan or put money on your credit card, you can explore small business grants as a funding option.
There’s a big difference between a grant and a loan. In simple terms, you have to pay back a loan, but you do not have to pay back a grant. A loan requires that you pay the money back within a certain time period. It can also come with high interest rates. If you choose to take out a loan, be aware that you will be paying back more than the face value of the loan. The longer it takes for you to pay off the loan, the higher your cost will be.
So searching for organizations that provide grants instead is a smart way to fund your business. When you’re looking for assistance starting up a company, it’s best to know where to look for grant money.
There are obvious benefits to small business grants. Primarily, that a grant allows you to spend more time focusing on developing your business and less focused on funding it. Imagine having the ability to fund your business without worrying about paying back friends and family, answering to an investor, or spending years paying down loans or credit card debt.
Of course, there are strings attached. Finding a small business grant is no easy task. Securing a small business grant is even more difficult. Despite that, the process is well worth it if you can find one to fit your business.
Everything You Need to Know About Small Business Grants
As you know, finding a small business grant isn’t easy. Small business grants aren’t created to give money to just anyone starting a business. Small business grant programs are created with a certain purpose in mind. Some of the reasons could be to support a nonprofit, or to advance healthcare technology, small business innovation research, or another important cause.
Therefore, there are different types of small business grants available for business owners. By learning the difference between the different types now, you will have an easier time finding grants that apply to your business.
There are three main types of small business grants available: state grants, federal small business grants, and private company grants.
Each of these grant opportunities are funded with a different purpose in mind.
Federal government grants
Federal agencies choose to award grants for many reasons. The federal government often awards grants to nonprofit organizations and research institution, but your privately owned company may also qualify if it offers products and services that are related to government initiatives. These are a few places to look for federal grant opportunities:
- Department of Defense
- Department of Agriculture
- Department of Energy
State and local government grants
State and local grants are intended to help with a statewide agenda. New small businesses create job opportunities, which lowers unemployment and draws more people to the area. Both of which stimulate the location’s economy.
A development agency typically awards grants that support small businesses that can aid in the state’s economic development. Needless to say, local agencies are willing to fund businesses that they believe will benefit the community.
Private companies may decide to award a private foundation grant for a small business that has a similar mission to their own or is creating a product that they believe in.
Once you’ve established which type of provider best fits your business, you can narrow down your search even further by subtype.
A few common subtypes of small business grants include:
- Small business grants for women entrepreneurs: Women’s entrepreneurial organizations encourage women to start their own businesses. Innovateher, for example, is a national competition aimed at finding products and services that empower the lives of women and their families.
- Small business grants for veterans: These grants encourage American heroes to open their own small businesses.
- Small business grants for minorities: There are plenty of options targeted toward minorities. The goal is to diversify small businesses across the country.
How to Apply for Small Business Grants
The application process for small business grants can be lengthy. Before you even begin your application, you need to do research to make sure that your business idea aligns with the grant’s mission. Writing up your business plan before applying can help you prepare for the process and narrow your focus.
Most grants require and extensive application, and you want to be sure to give each application the time it needs. If necessary, find technical assistance to help you in the small business development process.
Small business grant contests are competitive. You’ll want to make sure you are positioning yourself and your business as best as you can to be considered. If you don’t feel confident in your own ability to write a compelling grant application, considering hiring a grant writer.
Where to Look for Small Business Grants
Finding a small business grant is no simple task. There’s a lot of competition amongst small business owners to find funding opportunities.
Despite the competition, there are many places to search for small business grants.
Begin your search by researching associations and government organizations that are relevant to your target industry. Then, explore their websites, social media pages, and even send an email or call to find out if they fund small business grants.
Great places to look for small business grants include:
To find area-specific grants, look for grants specific to rural areas or central cities, or grants that are specific to your industry. You can typically find these on state and local government websites or on the websites of nonprofits committing to development in a certain region or field of work.
Some rural areas or cities are interested in attracting more small businesses to stimulate their economy. Explore opportunities in your area or even consider relocating. Running your business in an area that’s eager to support new businesses could reduce your overhead costs. Often these areas have lower taxes and costs of living. Both of which allow you to put more of your resources back into your business.
This list is by no means comprehensive, but it should help you start your search for small business grants.
Other Ways to Fund Your Business
Since small business grants are hard to come by, it’s worth exploring other ways to fund your business as well. There’s nothing quite like free money to help you get started, but if you don’t qualify for a grant, you have other options.
While you search for grants and submit applications, it’s worth creating a backup plan.
Here are alternative ways to fund your business:
- Small business loans
- Angel investors
Also consider ways that you can earn extra money in your free time. Some of these don’t even require that you leave your house. While a few hours a week won’t fund your business startup entirely, making a little extra money on the side could go towards some expenses or help cover your cost of living during the expensive startup process. You could do this through passive income, a side hustle, or even work-from-home jobs that allow you more flexibility than an office job.
Finding the Right Funding for Your Business
Now that you’ve learned all about small business grants and other funding options, it’s time for you to seek and secure funding for your business.
Start by looking at the Small Business Administration’s website. After that, explore interest-based grants, loans, and other ways to find the funding you need to open your own business.
Take a step in the right direction by following the steps above to find the best funding for you.