The Small Business Administration (SBA) is a government agency that helps small businesses start and grow. They offer grants to help with business expenses such as rent, inventory, marketing, legal fees, and more.
A small business grant is a type of government assistance to help businesses get started. The grants are typically given by local governments and the U.S. federal government, but also sometimes come from state or regional governments.
We’ve all seen the late-night TV ads promoting “free money from Uncle Sam” to businesses. Unfortunately, this is not the case for the most part.
I say “for the most part” because government subsidies for small companies do exist, but they are only available to a select group of applicants.
Here’s everything you need to know about government subsidies for small companies, including who qualifies and how to apply.
What kind of financial aid are available?
Let’s start by defining what the government does not give grants for before we look at the many kinds of government grants accessible to small companies.
Grants are not available from the federal government for any of the following activities:
- Starting and growing a company
- Getting out of debt
- Taking care of operating costs
However, the federal government does give subsidies to small companies in specific areas and industries, which is where the twist comes in (for example, scientific, environmental, and medical research). For high-tech startups or high-growth businesses, the Small Business Innovation Research (SBIR) program, for example, is one of the most profitable sources of government funding (more on SBIR below).
Because government grants are financed by our tax money and allocated via Congress and the White House, they are generally out of reach for small companies. Funding is carefully regulated, and only commercial ventures that are directly linked to the goal of a specific government department, such as the United States Department of Agriculture or the United States Department of Energy, are granted.
Things aren’t any better outside of Washington. Although certain state and local government agencies may give small business grants—often referred to as “discretionary creative grants”—these state funds are tightly tied to agency goals and tend to be restricted to bigger businesses.
Where to look for small business grants and how to apply for them
If you believe your company may be eligible for a grant, the sites listed below might assist you in your search:
Grants from the federal government
Uncle Sam’s primary repository and searchable database of over 1,000 grant programs is Grants.gov. Navigate to the “Browse Eligibilities” page and choose “Small Businesses” to limit your search to small company grants.
Grants from the state and municipal governments
For further information about discretionary incentive funds, contact your state’s economic development department.
Grants from corporations and nonprofit organizations
Select organizations (WomensNet, for example) and businesses, such as Intuit’s “Love our Local Business” campaign, provide small business grants.
SBIR (Small Business Innovation Research) funding are available to R&D companies.
If your small company is involved in research and development (R&D), you may be eligible for a Small Business Innovation Research (SBIR) award, as previously stated. SBIR is a federal program administered by the Small Business Administration (SBA) that provides grants and government contracts to encourage high-tech innovation and economic growth by funding the research and development required to create and market new technological goods. SBIR granted over $2 billion in research funding in 2010, with more than half of the cash going to companies with less than 25 employees.
While the requirements for an SBIR grant are simple—companies must be more than 50% American-owned, based in the United States, and employ less than 500 people—obtaining one takes some work. To begin, look for publicized agency bids on the SBIR website to demonstrate that your activities are aligned with government R&D objectives. Then, submit a proposal describing your venture’s technological advantages and benefits. If you are chosen, you will begin a phased R&D process. SBIR.gov provides additional information on this tiered strategy.
Last but not least
Hopefully, this knowledge dispelled any misunderstandings you may have had regarding government subsidies for small businesses.
If you need money, don’t spend your time falling for the promises of late-night “free government money” infomercials; instead, look into alternative options.
If you don’t qualify for a bank loan, an SBA loan may be simpler to get than a traditional bank loan. The SBA funds an SBA loan by making a guaranteed loan to your bank, which then provides a small business loan to you, the company owner. This strategy enables the bank to take on a bit more risk than it would otherwise be able to.
Crowd financing, borrowing from friends and family, personal money, angel investment, and venture capital are some of the other possibilities. Best of luck!
This post is part of our Company Funding Guide: Bplans can help you finance your business right now.
Do you need assistance in obtaining a loan? Take a look at Bplans’ Loan Finder.
The funding a brand new business is something that many people believe is possible. However, the reality is that there are very few grants available for small businesses.
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