Free Money For Small Business: Grant Myth vs. Reality
Whether starting or growing a business, having access to capital is key. One source of funding that many small business owners want to learn more about is grants.
If I had a nickel for every time someone asked me about getting free money to start their business, I would be very wealthy, however, I had to be the bearer of bad news. The short answer is that most small businesses aren’t going to be eligible to apply for one. Clients would always ask why not, as there often stories of a friend of a friend or about another business they heard that got one. My response was that if there was all of this easy, free money out there for businesses, then I would have gotten some, and would now be drinking drinks with little umbrellas on the beach. because I, too, like free money.
With the bad news out of the way, there is a glimmer of hope for some as there are funds available to start and grow a business. I’m not going to touch on the Covid-19 stimulus funding that was available, such as the Economic Injury Disaster Loan (EIDL), as this was (hopefully) a one-time program, but these funds were targeted at businesses that suffered during government-mandated closures.
But, back to the question about grant funding for small businesses, here is some good news. And while the numbers are a little fuzzy, in my research, I estimate that the U.S. budget includes almost $185 billion in funding for grants. Then we have grants from foundations (estimated $75 billion) and corporations (estimated $20 billion).
So, yes, there is free money for small businesses. Despite what you may have heard, it’s not easy to get, because there are a lot of other people who like free money, plus it’s going to take some time to prepare the application and finally receive the money if you are awarded, not to mention the reporting which can be significant with federal and state grants.
So, let’s go over what a small business grant is, how to spot scams, and some sources of legitimate funding.
What is a small business grant?
This part shouldn’t be much of a surprise, but a small business grant is pretty much what you might expect – funds for entrepreneurs that don’t have to be repaid and don’t require giving up any equity in the business.
The main sources of small business grants include:
- Government programs
- Federal government
- State government
- Local municipalities
- Economic Development (Main Street, Chamber of Commerce, etc.)
- Private sources
And while getting free money for your business sounds like an exciting prospect, I do want to explain that grants almost always come with strings. The saying that there is no free lunch is appropriate here because grantors, especially the government, don’t give grants without some sort of verification, expectation, and reporting.
How Do I Find Legitimate Small Business Grant Programs?
I’ve worked with small business owners for a long time, and have even helped many get business grants. The problem is that while there are some small business grants, there are a lot of scams too, and I don’t like to see people who are trying to do honest work get scammed.
The key to finding legitimate business grants is researching who is giving you the funds. There isn’t a way to catch all scams, but some of the more common flags to watch out for include:
- Having to pay for grant information.
- The granting entity will do the work – all you have to do is pay a fee.
- The grant is guaranteed, or you get your money back. (I have worked with dozens of businesses that fell for this and never got their money back.)
- You were randomly selected to receive a grant (and usually have to provide a credit card to hold the funds).
- The grant application requires personal information like your Social Security Number, bank account information, etc. If you are awarded a grant, this information is typically needed, but not at the time of application.
- A letter or email announcing the grant comes from the “government,” but the website address isn’t a .gov.
So, to verify the granting agency is legit, I recommend doing some background research on the entity before sending any information, as there are a lot of scams. One source to check on federal resources is the USA.gov Index of Government Agencies website. You can also look up foundations at your local library or typically on the internet, or contact a local Small Business Development Center and ask them to verify the program.
While the list of grants that are available to small businesses is constantly changing, I’ll go over some of the longer-running and popular ones.
Federal Government Grants
The federal government has the most grant opportunities available to small businesses. Most of these are not eligible for new businesses, but that shouldn’t keep you from looking.
There are a lot of government agencies, but fortunately, the government has set up a central database to search for federal grants. At Grants.gov you have access to grant opportunities for all federal government agencies and most federal departments (except for the National Endowments for the Arts) grant opportunities.
Another free resource that is easy to search for state and federal grants is USGrants.org.
Small Business Innovation Research Program (SBIR)
The Small Business Innovation Research Program is a program that supports small businesses with federal research opportunities. Funds are targeted at businesses with scientific and technological innovations that have the potential for commercialization.
The Small Business Technology Transfer Program (STTR)
The Small Business Technology Transfer Program is similar to the SBIR program by funding research and development (R&D), but STTR recipients are required to be working with a research institution.
There are 11 federal agencies that participate in the SBIR and STTR programs that are required to allocate a certain percentage of their R&D budget to small businesses. In 2022, this budget was over $100 million. The Federal agencies that participate include:
- Department of Agriculture
- Department of Commerce – National Institute of Standards and Technology
- Department of Commerce – National Oceanic and Atmospheric Administration
- Department of Defense
- Department of Education
- Department of Energy
- Department of Health and Human Services
- Department of Homeland Security
- Department of Transportation
- Environmental Protection Agency (EPA)
- National Aeronautics and Space Administration
- National Science Foundation
Given the requirements of these programs, funds rarely go to a startup.
Learn more: https://www.sbir.gov/about
America’s Seed Fund
Next, is the America’s Seed Fund, which is connected to SBIR and STTR programs, but funding is handled through the National Science Foundation (NSF). $200 million in funding is available each year and enables entrepreneurs with technology developed through the SBIR and STTR programs to gain more exposure. The program focuses on ideas that make a major societal impact, and newly formed companies are eligible.
Learn more: https://seedfund.nsf.gov/
SBA Growth Accelerator Fund
The U.S. Small Business Administration (SBA) offers $50,000 to $200,000 in prize awards for impactful and inclusive approaches. Funds are targeted towards STEM (Science, Technology, Engineering, and Mathematics)-based entrepreneurs and startups.
Learn more: https://www.sbir.gov/accelerators
Economic Development Administration
The Economic Development Administration (EDA), is a part of the U.S. Department of Commerce and is a federal agency that provides grants for planning, technical assistance, and infrastructure construction.
Generally, the EDA provides grants to local economic development agencies. However, they occasionally provide grants directly to businesses.
Learn more: https://www.eda.gov/funding/programs
Development Innovation Ventures Grant
Development Innovation Ventures (DIV) is a grant program through the United States Agency for International Development (USAID) for innovators and researchers around the world to test new ideas, take strategic risks, build evidence of what works, and advance the best solutions.
Learn more: https://www.usaid.gov/div
State grants are a little more difficult to find as each state individually administers its grant programs, and sometimes funding comes through multiple agencies.
Economic Development Grants
Generally, every state uses its economic development agency to administer any state small business grants. Occasionally, a state will offer a grant for a small business, but in general, these business grants are used to either provide an incentive to a large business considering moving away from its current state or for high-tech and scalable businesses that will provide a lot of jobs.
Georgia, for instance, has EDGE Fund through the Georgia Department of Community Affairs, which provides financial assistance to companies looking to relocate, while the Michigan Economic Development Corporation has the Michigan Business Development Program to provide grants to large projects that will provide jobs and investment in the state.
Another grant program that is available in many states is the State Trade Expansion Program (STEP). The STEP program is funded by the Small Business Administration, and these funds are granted to states and are then distributed to small businesses for the purpose of helping businesses export their products and services. Funding typically goes to helping make introductions, trade missions, trade show expenses, etc.
Learn more: https://www.sba.gov/funding-programs/grants/state-trade-expansion-program-step
After federal and state grants, many units of local governments offer small business grants. These grant programs are normally lower dollar amounts and are found through a local Economic Development Office, or downtown development authority, or Main Street program.
Eligibility requirements are often tied to a specific geographical area, and funds have to be used on specific purchases. For instance, Main Street grants are normally only given to retailers located in a particular part of town, and funds are available to upgrade the exterior of a building. Additionally, through SBA, USDA, and other organizations, funding is available for small business assistance and training programs.
Several corporations, foundations, and nonprofits have a mission to support small businesses, and they will do this through technical assistance (training, mentoring, advising) and grants.
NASE Growth Grant
The National Association for the Self-Employed (NASE) offers grants to NASE members to help them grow. The program has been around since 2006 and has awarded nearly $1 million in grant funds. Each month a member is chosen to receive up to $4,000, and four winners can receive an annual $3,000 college scholarship for their dependents.
Learn more: https://www.nase.org/become-a-member/member-benefits/business-resources/growth-grants
FedEx Small Business Grant Contest
The FedEx Small Business Grant Contest is an annual competition that awards $30,000 to 10 small businesses. In addition, if there is a veteran-owned business in the top 10, that business is eligible to receive an additional $20,000 from USAA Small Business Insurance.
Applications are accepted from late January to mid-February, each year, and the winners are announced in early May.
Learn more: https://www.fedex.com/en-us/small-business/grant-contest.html
Visa Everywhere Initiative
The Visa Everywhere Initiative is a grant competition that offers grant funding to startups around the world that have a product or service that creatively involves Visa’s products. The overall winner of the competition is awarded a $100,000 small-business grant.
Learn more: https://usa.visa.com/visa-everywhere/everywhere-initiative/initiative.html
Dream Big Awards
The U.S. Chamber of Commerce offers the Dream Big Awards, which is a program for small businesses that have been in operation for at least one year, less than 250 employees, and revenues under $20 million.
Applications are due in early July, and the grand prize is $25,000
Learn more: https://www.uschamber.com/co/dream-big-awards/dream-big-awards-faq
Minority-Owned Business Grants
Fast Break for Small Business
The Accion Opportunity Fund partnered with LegalZoom, NBA, WNBA, and NBA G League to provide entrepreneurs with grants of up to $10,000 and services. Funds are available to black-owned businesses that have been in business for at least six months and have annual revenue under $1 million.
Applications are open in early February.
Learn more: https://aofund.org/program/fastbreak/
Minority Business Center
In addition to grants, there is funding for minority business centers, which provide assistance with business plan writing, securing capital, exporting and more to minority-owned businesses.
Learn more: https://www.mbda.gov/mbda-programs/business-centers
Woman-Owned Business Grants
Every month, WomensNet awards two businesses with a $10,000 grant, with the opportunity for a year-end grant award of $25,000. To be eligible, a business must be woman-owned. Also, there is a $15 application fee, which is typically a red flag for a grant program, however, this program has been around for a long time.
Learn more: https://ambergrantsforwomen.com/get-an-amber-grant/
Johnnie Walker First Strides Grant
Johnnie Walker and IFundWomen are supporting trailblazing women-owned businesses that are taking strides to create a positive impact. A $10,000 grant is available and opens in March.
Learn more: https://ifundwomen.com/johnniewalker
Ladies Who Launch
This program is designed to bridge the equity gap in entrepreneurship and help women-owned businesses. The Launch Program provides a $10,000 grant, mentorship, and six months of education.
This program is open to women and non-binary-owned consumer packaged goods businesses (such as selling items like food and beverages, household goods, apparel, and more) that have annual gross revenue between $100,000 and $499,000.
The deadline to apply is March 31.
Learn more: https://www.ladieswholaunch.org/launch-program
SoGal Black Founder Startup Grant
The SoGal Black Founder Startup Grant program is targeted at black women or nonbinary entrepreneurs. Grants are available up to $10,000 for businesses that plan to seek investor financing and have a scalable, high-impact idea.
Learn more: https://www.iamsogal.com/black-founder-startup-grant/
Cartier Women’s Initiative Award
The Cartier Woman’s Initiative Award is a program for female entrepreneurs around the world who focus on making an environmental or social impact. In addition to grant funding, winners receive mentoring, training, and media opportunities. Applications are due each January.
Learn more: https://www.cartierwomensinitiative.com/
Women’s Business Centers
Women’s Business Centers (WBCs) are a grant-funded program that is a part a national network of entrepreneurship centers throughout the United States, that assists women in starting and growing small businesses.
Learn more: https://www.sba.gov/local-assistance/resource-partners/womens-business-centers
Veteran-Owned Business Grants
Second Service Foundation Military Entrepreneur Challenge
Formerly named the StreetShares Foundation, the Military Entrepreneur Challenge, in partnership with the Samuel Adams Brewing American Dream program, provides opportunities for military veteran and military spouse entrepreneurs who are starting or growing a business that creates a positive social impact in their community.
Learn more: https://www.secondservicefoundation.org/militaryentrepreneurchallenge
Veteran’s Business Center
The Veteran’s Business Outreach Center (VBOC) is a grant-funded program that provides small business advising for veteran-owned businesses (and military sourses) in areas such as training, counseling, and more.
Learn more: https://www.sba.gov/local-assistance/resource-partners/veterans-business-outreach-center-vboc-program
Most small business grants are not targeted at startup businesses, and even those that are, have specific deadlines which probably don’t align with your timeline. I know there are a lot of people who want to start their business but may not have the funds to do so, so they give up when they find out there isn’t free money to start a business.
Funding is a huge challenge in starting a business, but my recommendation is to not pin your future hopes on getting a grant. If your idea is good enough and you have the resilience to see it through, you will find a way.