Many federal, state and local agencies offer government grants – monetary awards that do not have to be repaid. Government grants are often perceived as elusive, because the entire application process can be quite complex and requires significant perseverance. In fact, the U.S. government's official site cautions readers that the government does not give away "free" money to start a business – grants are awarded under specific conditions and fund a variety of sources.
Instead, grants are generally awarded to existing businesses that qualify for a specific funding purpose. The U.S. Small Business Administration (SBA) outlines the process and is a good starting point for finding grants. Grants can be difficult to secure and may come with several spending constraints, as the grant-giver often has a very specific purpose in mind.
Here are some avenues to pursue and general advice about the world of government grant money for business, as well as some of the additional resources that government agencies will help business owners find.
What is a government grant?
A grant is one method the government uses to fund projects, ideas and other initiatives to stimulate the economy. The Catalog of Federal Domestic Assistance (CFDA) is the official compendium of the various assistance programs the U.S. government offers. It's a lengthy resource that comprehensively details the many areas of funding in which the government seeks to assist businesses.
An excellent site to search for grants that might suit your business is Grants.gov. It's the central hub for finding grants administered by the federal government. The site can be a little overwhelming at first, so plan to spend some time exploring the various sections. However, the site offers a series of walk-throughs for the application process and numerous tips for a successful strategy.
How does a government grant work?
The money used to fund government grants comes from the legislative and executive branches. Congress writes bills that authorize and appropriate funding to government grant programs. Once Congress passes these bills, they move to the president’s desk for final approval.
According to USA.gov, government grants are intended to fund critical recovery projects, research-based innovation and more. The CFDA lists projects that have earned government grant funding.
Most government grants are highly specific. The specialized nature of government grants largely accounts for their complicated application process as compared to what it is like to apply for small business loans.
How to apply for government grants
Applying for government grants is a notoriously lengthy, arduous process. It can be such a Sisyphean battle, in fact, that many small business owners hire expert help. Whether you go it alone or bring on a grant writing expert, you should follow the below steps as laid out by Grants.gov.
- Learn: Spend time at the Grants Learning Center to get a read on what is out there.
- Check: Many grants have strict eligibility requirements, so make sure you qualify before applying.
- Search: To increase your chances of being awarded a government grant, you'll want to find one that aligns with your work. For example, the government grant site lists the Women's Business Center – Initial Phase Grant. This opportunity is for nonprofits that provide "entrepreneurial development services to women, with an emphasis on socially and economically disadvantaged entrepreneurs, within the state of Maryland." This result appeared under a search for "business startup." So, to winnow down the available grants and look for the right opportunity, search for grants that are relevant to your existing business model.
- Register: To apply for any of the available grants, you must create an account and apply using the Workspace feature.
- Apply: If you find a grant that is the right fit for your business and you think you have a reasonable chance of qualifying, then apply with your Workspace account.
- Track: Once you've applied with your Workspace account, you'll be assigned a tracking number, which you'll use to follow up on your status.
Types of government grants
Given the large volume, you'll find many different types of government grants. Many of them target industries or businesses that offer a specific type of service.
The funding is very different from one type of grant to another. A grant often has a funding floor and ceiling, so you should first decide if the floor amount would be sufficient compensation for your time and effort.
While many business owners may be eyeing a government grant because of the concept that it provides more financial freedom than a loan, much larger sources of funding are often available elsewhere. Grants.gov lays out how to apply for grants and search for sources, and the SBA grant funding page outlines additional funding sources. Interest-free loans and government agencies connected to investment capital are other avenues to pursue.
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Grants for women-owned businesses
Grants for women are another area of focus as the government seeks to back women-owned businesses. The SBA dedicates a section of its site to resources for grants targeting women-owned businesses and other sources of assistance for their growth.
Additionally, the Office of Women's Business Ownership provides advocacy and support, be it with grants for women-owned businesses or other funding and mentorship resources.
Grants for veteran-owned businesses
Veterans may look to the Office of Veterans Business Development. This initiative provides mentorship and business development services to returning veterans and service members. Veteran-owned businesses may use this as a resource not only for potential grants but for other tools that may help them grow.
Grants for minority-owned businesses
Many grants aim to grow the nation's ranks of minority-owned small businesses. Multiple government agencies are looking for ways to support these endeavors and help new businesses get off the ground. For example, the Minority Business Development Agency, a division of the U.S. Department of Commerce, provides several grant and loan programs, including assistance with private equity and venture capital sourcing.
Other types of assistance
Local assistance can also make a significant difference. The SBA resource finder is helpful for finding counseling and other mentorship services in your area. There are numerous experts in the world of grants and alternative funding who can improve your chances or give you better direction.
You can also explore the Small Business Administration's SBIR/STTR (Small Business Innovation Research/Small Business Technology Transfer) program, which provides funding and mentorship to stimulate technological innovation. A large number of federal agencies backs it, so there's a broad scope of opportunity. A portion of the funding is set aside as competitive opportunities for small businesses.
Government grant opportunities can provide for-profit businesses and nonprofit organizations with a valuable source of funding. It could help you kick off assets or personnel that you need to get off the ground. The federal, state and local levels are all potential sources of funding to explore. Be prepared for a long journey, but the boost to your business could be well worth the effort.
Additional reporting by Derek Walter.