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Government Grants for Small Business—Think you Qualify?

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Government Grants for Small Business—Think you Qualify?

By Caron_Beesley, Contributor
Published: October 17, 2011 Updated: December 30, 2013

Does the government provide grants to small businesses? Ah, well, yes and no. It depends on what business you are in, what kind of return the government and taxpayers can expect from their investment and whether you match some very stringent eligibility requirements.

Here are some facts about government grants for small businesses, including who is eligible and how you can go about finding them. 

Can I get a Government Grant to Start and Grow My Small Business?

It’s not unreasonable to expect that the government provides grants for small businesses.  People all over the internet are telling you it’s possible, and some will charge you for giving you “details.” The fact is, government grants are funded by your tax dollars and, therefore, require very stringent compliance and reporting measures to ensure the money is well spent.  As you can imagine, grants are not given away casually.

Whatever you’ve heard from speakers or read on the internet, federal and state governments do not provide grants for any of the following:

  • Starting a business
  • Paying off debt
  • Covering operational expenses

That being said, some federal government grants are available to small businesses. But here’s the catch —federal grants for businesses are typically aimed at specific industries and targeted causes identified by the government, such as scientific and medical research, conservation efforts, and so on.

At the state government level, business grants or “discretionary incentive grants” are sometimes available and, again, are closely tied to the agency’s agenda. These grants usually serve to advance regional economies and promote causes, such as clean energy development. However – and here’s the crux of the matter – state grants are often targeted at larger employers and have stringent eligibility criteria that prevent many small businesses from tapping into this funding source.

My Small Business is Involved in R&D, Am I Eligible for a Grant?

If your small business is involved in scientific research and development (R&D), you may qualify for federal grants under the Small Business Innovation Research (SBIR) program.

SBIR is a federal program, coordinated by the SBA that awards grants and contracts to small businesses engaged in research and development. The grants fund the R&D necessary to develop innovative technological products that can be brought to market. You can read more about how the SBIR program works, eligibility requirements, and how to apply for a grant in this blog: Help for Start-Ups, Pt. 5: How the SBIR Program Can Help Your High-Tech Smallbiz.

Doesn’t the SBA Provide Grants to Small Businesses?

Although the SBA does coordinate the SBIR program, it does not provide grants.  In fact, most SBA loan programs involve SBA placing repayment guarantees on loans that are actually made by commercial lenders, in effect sharing the risk of the loan with the lender – and are not loaned directly by SBA itself. The SBA guarantee represents the portion of the loan that SBA will repay to the lender if you default on your loan payments. Learn more about SBA’s role in the small business loan process.

How to Find Grants

If you want to satisfy your curiosity about available grant opportunities your small business may qualify for, you have two options:

1) Search for Small Business Grants using the SBA Loans and Grants Search Tool – The tool includes state and federal financing programs specifically available to small businesses.

2) Search for Federal Grants via Grants.gov – Grants.gov is the federal government’s searchable public database of over 1,000 grant programs that award roughly $500 billion annually. Use the Advanced Search tool to search for a grant by eligibility (e.g., for-profits or small business), by issuing agency, or category (e.g., environment or science and technology).

Government Grants in a Nutshell

In a nutshell, if you are seeking “free money” to launch or expand your business, forget about it. You are far better off focusing your efforts on developing a sound business plan that capitalizes on a viable market, a compelling product or service, and a passion for business. If you do need financing, consider a small business loan instead.

If you are eligible for a government grant, it’s important to note that the government will often expect some return on its investment: either indirectly through improvement in regional economies; or directly through the development of technology which the government can use in its programs and services.

Related Resources

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About the Author:

Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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