An Explanation Of Small Business Grants

Many people in business mistakenly believe they can only leverage loans and lines of credit to grow their small businesses or increase stability in a bumpy economy. However, this isn’t the case. Increasingly, business owners are leveraging a funding option once only reserved for nonprofit organizations – small business grants.

The primary difference between a loan and a business grant is that loans must be repaid (usually with interest) while grants do not require repayment. Free money you say? Well, no, it’s not that simple and will require some explanation of the finer points of grants before your small business jumps in head first. But, once you understand the process and benefits, you may find these grants are perfect for you.

Below are some specifics on grants catered towards a small business and the process to help you better asses whether your small business can get funding through them.

Grants are:

1. Specific. As you research grants, you will find they are granted to specific types of owners (i.e. women) or business segments (i.e. education) or location. If your business fits the bill, you’re on track to secure your small business grant.
2. Labor intensive. Though loan applications can be time consuming, small business grant applications can take weeks to complete as they require considerable information on how you do your business, who is running it and how you will use the grant. There are many more questions to answer as grant issuers do their best to assess your worthiness.
3. Public or private. While many small business have types of grants available through the federal government, there are hundreds of private organizations that offer grants to a small business as well.
4. Sometimes renewable. Some grants are one-time payments while others are renewable. You will have to re-apply for the grant when the previous term expires but it is usually worth the extra work.
5. Monitored. Grants usually require the small business recipients monitor their business over the course of the grant’s term and report back to the granting institution on how the money was used and what successes were achieved as a direct result.
6. Often fee-based. You may have to pay a fee to submit a completed grant application to help defray processing costs. When you consider the possible return on this “investment” it’s usually quite nominal.
7. Increasingly popular. Business owners are becoming increasingly wary of loans and lines of credit and desire new means for funding their businesses. Grants are in greater demand in an economic downturn. But for those who secure them, the value is unparalleled.
8. Usually granted for research and development. If you want a grant, build a better mousetrap or something else not seen in the business world before you invented it. Your small business is in even greater demand if your research and development are in the area of new technologies. These companies (and nonprofits) are the first to win grants.
9. Better for companies with a philanthropic angle. While this doesn’t mean you are a full-fledged nonprofit, your small business will find it easier to come by a grant if some part of your business benefits your community.

Small business grants will never replace lines of credit and loans as they are not repaid by the recipients and cannot be sustained over time in the same way. However, when the funds are there, small businesses are free to use 100% of their grant without concern for repayment or additional fees. It can provide peace of mind in a time when it is not easy to come by in the business world and allow growth that otherwise may not have happened.