Small Business Grants: A Reality Check

By QuickBooks

2 min read

Thousands of small-business owners are looking for grants to fund their startup businesses. But the reality is that these grants are as rare as hen’s teeth. Those that do exist are usually earmarked for businesses that fall within very narrow socioeconomic parameters.

First, the Bad News

Colorful online ads promising packages of grants that you’ll never have to pay back, and “Obama stimulus packages” are scams, according to the Small Business Administration. These ads are fronts for scammers charging $30 to $50 for lists of “free” grants that do not exist. The SBA warns that you may also lose more than that if you sign up for a subscription using a credit card.

No matter what you may have seen on the internet, federal and state governments do not provide grants for starting a business, paying off debt, or covering operating expenses.

In fact, the SBA website clearly states, “The federal government does NOT provide grants for starting and expanding a business.”

For minority small-business owners, the SBA’s 8(a) Business Development Program may provide loans. To qualify, you need to be able to document your minority status. The 8(a) program may also pair you with a mentor who can facilitate some business networking and possibly even subcontracting. But these are loans, which will need to be repaid with interest.

Grants are almost always given to nonprofit endeavors that are making some attempt to improve the human condition. Private organizations and corporations frequently offer grants to programs and businesses that are in line with their mission. However, many of these organizations do not accept unsolicited grant proposals. They make grants only to businesses and organizations that have been recommended to them, generally through their advisory board.

Now. the Good News

There are, however, alternative ways to seek out grants for small businesses, including those focused on innovation, conservation, and social entrepreneurship.

There are a few rare exceptions to the “no free government money” rule. The National Institutes of Health allow small and startup businesses to apply for small-business grants online. NIH grants aim to help businesses of fewer than 500 employees that need money for research and development to bring potentially life-saving new technologies to market.

The U.S. Department of Agriculture‘s Natural Resources Conservation Service sponsors annual grant competitions and provides extra money for small or new farmers interested in developing new and innovative ideas for conservation of natural resources. In 2014, for example, Wetland Dynamics in Colorado won a $60,000 grant to develop an acoustic monitoring system for tracking wetland bird populations.

Instead of looking for money for general business purposes, search online for grants available on your home turf. Search by city, county, and state and you are likely to find small-business grants for waste reduction, renewable energy or energy efficiency, entering export markets, or offering a minimum number of new jobs.

In general, if you are looking for funding for a small or startup business, your best bet is to write a solid business plan and find the right type of funding for your business.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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