Everything You Need to Know About Small Business GrantsSmall Business Funding•Apr 27, 2023• 5 min read
More than anything else, small business owners need funding to keep their doors open. There are a variety of ways to fund a business, including personal savings, loans, credit cards, and grants.
Between the government, corporations, and other sources, there are billions of grant dollars up for grabs in a single year. Small business owners should regularly explore grants as a way to hire seasonal help, purchase equipment, or launch new products. Here’s everything you need to know about how to find and apply for small business grants.
What Are Small Business Grants?
Small business grants are money given to a small business by a government, corporate, or nonprofit organization. Grants do not require repayment, and they are often used to support a particular project, objective, or mission.
What’s the Difference Between a Small Business Grant and a Loan?
When you take out a small business loan, the expectation is that you will pay it back, typically plus interest. Lenders will often require you to provide collateral in the event you can’t repay the loan amount.
Grants, on the other hand, have no expectation of repayment and function as a one-time gift. For this reason, some call grants “free money.”
Small Business Grants Benefits
First off, small business grants are a great, no-strings-attached way to fund growth and scale your impact.
As a one-time, no-cost payment, grant money help entrepreneurs invest in a new piece of equipment or purchase additional inventory for the holiday rush. After all, the number one small business need is funding, and grants can provide the money needed to build capacity to support future success.
Additionally, organizations and government agencies provide grants because of their positive impact on the larger community. Many grant programs specifically fund businesses with a positive social mission or that offer necessary goods and services. Grant funding is a great way to incentivize local small businesses to serve the public good. Successful small businesses also create well-paying jobs that enrich the local economy.
Types of Small Business Grants
Generally speaking, there are a few types of grants you’ll find:
There are thousands of local, state, and federal grants available to small businesses to fund their ideas and projects to provide public services and stimulate the economy. Grants are typically offered by specific agencies for specific purposes. For example, a small farm would probably benefit from a Department of Agriculture grant; technology businesses researching an innovative product might be a good match for a Small Business Innovation Research (SBIR) grant administered by the Small Business Administration. Depending on who you are, where you’re located, and what industry you work in, there is likely a government grant program tailored to support your needs.
Lots of nonprofits offer grants to small businesses doing work that aligns with their mission. If you are an owner from an underrepresented background or have a business with a social mission, these nonprofits will be eager to review your application.
Although less common, private businesses administer grant programs to benefit specific communities and social missions. A popular private grant is the WomensNet Amber Grant, which awards $10,000 to a woman-owned business each month.
Hello Alice Grants
Working with our partners, we directly administer grant programs that connect entrepreneurs with funds, mentorship opportunities, and other resources to help their small businesses launch and grow. Every applicant also gets free access to our suite of how-to guides, personalized resources, and a community of more than half a million small business owners.
Where to Find Grants
There are thousands of grant opportunities; look for grants specifically suited to your business. Here are some resources to help you find the needle in the haystack:
This database is your go-to resource for grant money from the United States federal government. Grants.gov allows you to search thousands of grant offers from federal agencies such as the Department of Agriculture, National Science Foundation, and others with billions of dollars in grant funding opportunities available to entrepreneurs. Visit the Grants Learning Center for resources and information to help you apply for government grants.
Small Business Development Centers (SBDC)
The are 62 SBDCs spread across the United States that offer advice and guidance to local small businesses. SBDCs are a great way to find information about local, state, and federal grant programs. If you have questions or need advice about completing a grant application, SBDCs are a great resource.
Hello Alice Small Business Funding Center
The Small Business Funding Center compiles all the best grants from around the web — including government and private grants — and organizes them in one place. A free Hello Alice account grants anyone access.
Hello Alice Newsletter
Finally, subscribe to our weekly newsletter to be among the first to hear about newly announced grant programs, as well as other small business resources.
Are Grants Taxable Income?
In general, yes, grants are considered taxable income. Typically, you include a small business grant, whether from a private or government source, as part of your annual gross business income and taxed accordingly. Finally, if you receive a small business grant, it’s always a good idea to double-check with the grantor and consult a tax professional for definitive advice.
How to Qualify for Small Business Grants
The qualifications for a grant vary depending on the program.
Most often, grants target a particular industry or demographic. For example, many government grants specify that applicants work in a particular industry relevant to the granting agency’s mission. Other programs might seek to benefit New Majority groups that have historically lacked access to traditional funding opportunities, such as women, people of color, veterans, people with disabilities, and the LGBTQ+ community. Always read a grant’s eligibility requirements to determine if you qualify for the program.
Additionally, many grants limit their eligibility to small businesses. What counts as a small business? Government programs typically adhere to the SBA’s “size standards,” which define a maximum revenue or employee count for different industries. Private/nonprofit grants will sometimes establish similar definitions for a small business to ensure funds go to small businesses that will benefit most.
Can I Get a Grant for a New Business?
Again, it depends, but grant programs usually judge applicants based on their proposed use of funds. Established businesses that are able to lay out a clear plan for how the grant will be put to use have an upper hand on new businesses that are just starting out.
How to Apply for Grants
Your grant application tells the story of your business and explains how you’ll put the funds to use.
Every program is different, but the answers in a successful application will align with the goals of the overall program. For example, if the program helps restaurants expand outdoor dining, address your plans for that in your application.
Grant applications typically include the following details:
- Mission statement
- Company background
- Leadership team
- Projected budget/use of funds
- Short-term and long-term business plan or goals
A successful grant application uses these details to make a compelling case for how your small business uses the funds. Additionally, because many grants exist to make a positive impact on local small businesses and reward innovation, try to set yourself apart from the crowd by providing a specific vision for what the grant makes possible. Finally, a good application presents a plan for the funds, a team to execute it, and a way to measure success.
Looking for more tips? Review Hello Alice’s step-by-step Write a Winning Grant Application guide for an in-depth explanation of what grant reviewers are looking for.
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