Community Development Block Grants - How Do They Benefit Businesses?
by BobK, Community Administrator
- Created: June 23, 2009, 12:13 pm
What Are They?
The Community Development Block Grant (CDBG) program provides annual grants to state and local governments to fund a wide range of economic development projects, such as affordable housing, infrastructure improvement, assistance for low-income earners, and inner city revitalization.
CDBG is one of the longest continuously run programs at the U.S. Department of Housing and Urban Development (HUD). HUD allocates funds to state and local governments on a formula based on several community need factors, including the extent of poverty, population, and housing conditions.
Large cities and urban counties, called 'entitlement communities,' are required to submit a 'Consolidated Plan' that establishes goals for the use of CDBG funds. Grantees are required to hold public meetings to solicit input from citizens to ensure that proposed projects are aligned with the community's most urgent needs.
How Can Funds from CDBG Grants Be Used?
HUD specifies rules for how local governments can use these funds. Among the list of eligible uses is for local government agencies to provide funds to private, for-profit entities when the assistance is appropriate to carry out an economic development projects that --
(a) Creates or retains jobs for low- and moderate-income persons;
(b) Prevents or eliminates slums and blight;
(c) Meets urgent needs;
(d) Creates or retains businesses owned by community residents;
(e) Assists businesses that provide goods or services needed by, and affordable to, low- and moderate-income residents; or
(f) Provides technical assistance to promote any of the activities under (a) through (e)
Local government may use CDBG grants to create programs that provide grants, loans, and/or technical assistance to small businesses.
How Does a Business Get Funds from a CDBG Project?
Businesses cannot apply for CDBG grants directly to HUD. However, local governments receiving CDBG grants use the funds to create loan and grant programs for small businesses.
For example, in Jackson, Mississippi, small businesses can apply for a Storefront Façade Grant to revitalize buildings in a CDBG area. Many other cities receiving CDBG grants have similar grant programs for improving storefronts.
The City of Hawthorne, California used CDBG funds to create a business assistance program, which provides supplemental funding to businesses carrying out projects that will create/retain permanent jobs available to moderate to low-income people.
Do not let the word 'grant' fool you. CDBG is not a source of 'free money' that can be used for any purpose, such as starting a business, advertising a business, paying business debts, etc.
If you are interested exploring how might qualify for CDBG funded programs, contact your city or county economic development agency or planning department.
Visit these pages more information on financial assistance programs:
Loans & Grants Guide
Find resources, checklists and information to help you obtain financing for your small business
Loans & Grants Search
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