When you are starting your business, you hope that you get enough investors so that you kick start your business without having to borrow loans that come with high interests from banks.
Unfortunately, sometimes at the very early stages of your business venture, you haven’t built a reputation yet; your business name isn’t well known yet and getting solid investors can be a bit of a drag, leaving you with no alternative other than to go begging for loans from the very banks and financial institutions you should be avoiding.
This automatically means that your business is in debt and you have to start repaying the debt as soon as your business starts making money. This can be stressful especially since most businesses are only able to break even in the initial stages. Luckily, you can get enough capital through business grants.
Small business grants are funds given to a business by an organization for a specific purpose. According to the government, grants received for the purpose of business is taxable income just like any other income you make in your business.
However, your business can purchase tax deductible business items using the grant award. Grants awarded to veterans are not taxable and neither are any grants you receive from a government program to help you pay energy bills or your mortgage.
Accessing grants might be a little hard to do seeing as grants are typically for nonprofit organizations and are essentially not available to for-profit businesses. You might come across individuals or organizations who claim they can supply you with a list of the available grants at a fee. Be very wary of such people as they may be running a scam.
This said, grants are available for businesses in the for-profit sector. You can get grants as a small business owner if/when you are involved in an obscure local program in your business.
It is important to note that when available, grants do come with strict restrictions attached. The grants have to be utilized in the specific way as stipulated by the grant provider. Failure to use the grants as directed could lead to penalties.
Business grants are not only available to small business owners during their startup phase, but also for company expansion, as well as for research and development. Grants are great since unlike loans, your business is not left in debt and you do not have to pay this money back.
Types of small business grants
There are different types of grants with the main two being government and private. As a small business owner, your business can qualify for government grants if your business is involved in special fields and industries, such as, environmental or scientific research, etc. Just peruse the government databases based on your location and industry.
You need to keep in mind that many services on these databases are paid and often jumbled and obsolete. Federal grants are largely off-limits to small businesses largely because they are bankrolled by American taxpayers and allocated through Congress and The White House.
Fund allocations are tightly controlled and only awarded to business efforts that are closely connected to the agenda of a specific government agency, such as the U.S. Department of Agriculture or the U.S. Department of Energy.
A few state and local government agencies also award small business grants which are also intimately associated with agency objectives and tend to be restricted to the more established companies.
The two types of government grants you can apply for are federal grants and state/local grants.
There are also some private grants available to small businesses. These are;
- corporate and non-profit, and
- SBIR (Small Business Innovation Research) grants for (R&D) research and development businesses.
SBIR website is the government’s central repository and searchable database of over 1,000 different grant programs. Tap on the “Browse Eligibilities” and select “Small Businesses”, to narrow down your search.
State and local grants
These are optional incentive grants. You will need to contact your state economic development agency state economic development agency to get information about these types of grants.
Corporate and nonprofit grants
You can apply for corporate grants where the grant money comes from various corporations or go for foundation grant which is a type of private grant where the grant money comes from a charitable foundation instead of corporation. Choice nonprofits such as WomensNet and corporations, such as the recognized “Love our Local Business” campaign also offer small business grants.
These private grants usually don’t have very strict application requirements as government grants but there is more competition for these funds.
SBIR grants for R&D businesses
Finally, there are Small Business Innovation Research grants available to you if your small business is involved in research and development (R&D).
SBIR is a federal program that is controlled by the U.S. Small Business Administration (SBA), that allocate grants and government contracts to encourage high-tech innovation and build the economy by contributing to the research and development required to progress and make profits out of innovative technological products.
To qualify for an SBIR grant, your businesses needs to be more than 50 percent American-owned, located in the U.S., and have fewer than 500 employees. What’s more, you will first need to give evidence that your undertakings are in line with federal R&D goals by searching advertised agency solicitations on the SBIR website.
Next, you will need to submit a proposal profiling the technical advantages and benefits of your venture. If you succeed in the first two steps, you’ll then enter an R&D process that is carried out in phases.
Frequently Asked Questions
What Are Grants?
A grant is an award that is given to a person, business, non-profit organization, and local and state government agencies. While many grant awards come in monetary form, some grants are in the form of products, goods, or services. They are provided to the grant winner free of charge.
Where can I get grants?
You can get grant funding from government agencies, private businesses and corporations, private and family foundations, as well as from private donors.
Are Small Business Grants Taxable?
This will depend on your own circumstances. The government considers grants received for the purpose of business as taxable income. You can however, purchase tax deductible business items using the grant award.
Grants awarded to veterans are not taxable nor are any awards from a government program to help you pay energy bills or your mortgage. Go to Topic 421 on the IRS website for more up to date information in regards to these issues.
Can I Apply For Multiple Grants At A Go?
Yes, you can apply for a number of grants at one time. In fact it is highly recommended that you apply for as many opportunities that you think suit the needs of your small business. A lot of grantors will often need the applicants to show other sources of support and funding, so having many grant awards may strengthen your likelihood of getting an award. So, go ahead and submit as many grant applications as you can.
How Quickly Are Grants processed?
The application process for each grant is different. Each grant process has its own rules and regulations, which are usually outlined in a Request for Application (RFA) or Request for Proposal (RFP).
These guidelines will inform you about the application submission process and deadlines, as well as the time period in which the grantor is looking to start issuing the awards.
Can My Bad Credit Hinder Me From Getting Grants?
No! Your credit score has nothing to do with a grant award. This is because you are not expected to repay grant awards hence grantors have no need to consider your credit score when making grant awards.
Grantors will mostly be interested in how closely your mission, plans, and goals line up with theirs. They will also be keen to see if your submission meets all the application standards.
I am hopeful that this information leaves you better informed about grants so you know whether your small business qualifies for grants. Remember, to receive grants, your organization has to work hard to find them and complete the application process, however long it may be.
All the best!