How free is “free money”? When it comes to grants, you’ll pay with your time.
Business grants are one of the few financing options you don’t have to pay back. But it’s not all that simple.
Grants can sound like a walk in the park, but there’s a reason that businesses turn to other types of financing first. Grants take a long time to find, even longer to apply for — and did we mention they’re extremely competitive?
Still, it might be worth looking into whether there’s a grant that can help your business. After all, “free” is pretty hard to beat.
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Is my business eligible for a grant?
Standard business grants don’t operate like business loans in terms of eligibility requirements, though qualifications for both grants and loans widely vary.
When you apply for a grant, you aren’t just convincing the donor to give you funding — you’re convincing them to give you funding over everyone else who applied. That’s one of the big differences between business loans and grants.
Grants tend to have a larger social cause in mind, such as encouraging women or minority entrepreneurs or helping out a particular community. You can also find grants specific to industries or regions.
What do you want to learn about first?
Federal grants for small businesses
The US government provides business grants at the federal and state level. Federal grants, however, don’t typically go to small businesses unless they’re involved in technology, development, scientific research or other issues of national concern. If this sounds like your business, you might want to look at two programs offered through the Small Business Innovation Research program:
- The Small Business Innovation Research program grant. The SBIR grant is designed to move government economic development initiatives into the private sector by funding tech businesses. You can apply to participate in SBIR through several federal agencies, which have their own guidelines.
- The Small Business Technology Transfer program grant. The STTR program is a slightly more rigorous version of SBIR. It’s available to businesses in the technology sector, and you’re required to work in partnership with a research institution if accepted. Like the SBIR, you can only apply through federal agencies.
All grants are competitive, but SBIR and STTR are especially difficult to get. That doesn’t mean you should write them off, but you might want to also look at other federal grant listings on Grants.gov, offered through federal agencies.
Eligibility requirements for SBIR and STTR
To qualify for either of the SBIR or STTR grant, your business must:- Be for-profit — unless it’s a nonprofit research institution applying for STTR.
- Be owned by a US citizen or permanent resident, another small for-profit tech business, or multiple venture capital companies, hedge funds or private equity firms.
- Have no more than 500 employees.
You’ll want to read the eligibility requirements carefully to fully understand the definitions set by the Small Business Administration.
State and city grants for small businesses
Small businesses outside of the tech sector might have better luck looking local. State and city grants tend to offer less money, but they’re also less competitive than other types of grants. Because they’re tailored to your community, these grants could have requirements that you’re more likely to fit.
You might want to start your local grant search with:
- USA.gov. This site has a section that provides a directory of small business resources by state, including grants, loans, tax incentives and training programs. It’s worth a look even if you aren’t sure you want a grant — you just might find financing you didn’t know as an option.
- Your local development center. State and city economic development centers might offer grant opportunities you won’t find on USA.gov. You can typically find your local center with a quick Google search.
If neither of these options do it for you, search for business grants on other grant directory websites.
Typically, your business will need to be within a specific state or city to qualify for a local grant — on top of other grant-specific requirements, of course.
Qualifying for a local grant
As with federal grants, state and city grants tend to be highly specific when it comes to eligibility.To qualify, you’ll typically need to:
- Operate a business in your city or state of residence.
- Require funding for a specific project, rather than working capital in general
- Be in business for more than six months.
Business grants from companies
Businesses that don’t qualify for a government grant might want to turn to the private sector.
Many large corporations run foundations that offer grants to small businesses, often within a specific type of industry or charitable cause. You might want to start with these two popular ones:
- Chase Mission Main Street. Chase Manhattan Bank awards $150,000 each year to 20 businesses who can tell the most compelling story of their business and its affect on their communities through an essay contest.
- Wells Fargo Community Investment. Wells Fargo offers grants to small businesses in almost every state, with a focus on nonprofits. Small businesses involved in education, environmental conservation, housing, veteran care and disaster relief might want to take a close look at this program.
Eligibility requirements, as always, highly vary with corporate grants. You generally won’t be able to get a grant if your business is less than six months old. You could also have trouble finding a corporate grant if you run a for-profit business or political organization. However, if you’re a for-profit business that’s involved with charitable activities or works to improve a community you may still qualify.
Finding a corporate grant
Search engines are your best bet to find a corporate grant. Try searching for grants by industry and your financial needs, rather than corporate grants in general — it’ll take you a lot longer to weed through foundations that can’t do anything for you. For example, if you’re have a restaurant in Chicago, you could simple search for “restaurant grants Chicago” to quickly narrow your focus.
Competitions for business grants
Get your business’s name out there while you apply for funding by entering a grant competition in your industry. Even if you don’t win, you stand to get lots of free advice, feedback and exposure for your business by entering.
One contest you might want to consider is LendingTree‘s small business grant competition, which grants the winner $50,000 and is open to small businesses of any industry nationwide. Or find more contests at Challenge.gov, a listing of government challenges small business owners can compete in for prizes.
Bottom line
Finding free funding for your business isn’t impossible. But make sure you’re ready to invest the often intensive time and resources in researching and applying for business grants.
If you want your money more quickly, consider other business financing options.
