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Wouldn’t it be nice if a person or entity would give you money to grow your business? The truth is, that isn’t likely to happen unless the funders are your friends or family. There are plenty of grants available for a small subset of business that are in certain industries. Here’s the truth about grants that you should know.
1. Small business grants are hard to find
If you’re a small business owner or you will be soon, you’ve probably heard of the United States Small Business Administration or SBA. The SBA is the government agency in charge of helping you find success as a small business owner. However, according to the SBA it, “does not provide grants for starting and expanding a business.”
The federal government has grant programs along with some state and private organizations but most fund non-profits.
2. Grants are specific
If you’re hoping to find something similar to a loan but you’re hoping not to pay it back, that’s not how grants work. Grants are often designed to foster growth or serve the public good. If an organization can give somebody money to fund research that may someday cure a disease or clean up the environment, that’s money well spent in the grantor’s eyes.
There’s very little good that comes from giving small businesses money for general growth.
3. Strict reporting requirements
If you receive grant money, expect very specific rules on how you can spend the money. And expect the paperwork to take a significant amount of time. Grantors know better than to give a business money and forget about it. Not only do they have a fiscal responsibility to their donors, raising more money requires convincing their donors that the money won’t be wasted.
4. The money may not be free
Before you go after grants, you’ll want to have some money saved of your own. Grants are often awarded based on matching funds. For every dollar the grantor gives you, you have to put up the same amount either through cash or financing. They want you to have “skin in the game” as well.
5. Grant writing is an art
Grant writing is tough. It takes a lot of time and there’s an art to completing the request. Many people looking for grants hire a grant writer for help. If you’re not the greatest writer and/or have no experience writing grants, get some help—at least for the first couple.
6. There’s a TON of competition
People in the grant business know where to look to find offers that might pertain to them. Because of the amount of competition you might be perfectly suited for the grant but don’t get it because so many others are too. Don’t make a business plan around getting grants.
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How to Find Grants
But what if you are the type of business or organization that grantors look for? How do you find a list of grants? Start with the SBA’s Loans and Grants Search Tool. Here, you can research different funding options that might apply to you. You can also try grants.gov for a long list of government-funded grants.
For other opportunities, visit the website or call groups and organizations related to your industry. If you’re a woman, for example, you could call you state branch of the Women’s business center and research Amber Grants to get started.
Sometimes the biggest stumbling block in obtaining funding is finding the grants that apply to you. This is where old-fashioned networking becomes one of your allies.
Consider an SBA loan
It’s not a grant but the SBA can help you get a small business loan. By going through certain SBA-approved banks, you can get a small business loan guaranteed by the SBA. This guarantee allows lenders to lower their lending standards. If you’re just starting or were turned down for a traditional loan, go to the SBA’s website and research the types of guaranteed loans available to you.
The idea of free money is certainly appealing to small business owners who are just starting or struggling to grow. The unfortunate truth is that you’re not likely to find it unless you’re a non-profit, educational institution, or contribute something that solves a large-scale problem. However, if you are in one of those industries that the government and private foundations and organizations want to see grow, there may be a lot of opportunities out there for you. Just be prepared for the mountain of paperwork and compliance that comes with any grant.
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