Whether it’s a young student attending college or a small business owner, funds are critical to staying afloat and achieving success. But with rising inflation, paying back loans is a major hurdle for many. That’s why many small businesses and undergraduate students rely on grants for financial aid. By getting approved for the right grant program, you can essentially access free money.
What Is a Grant?
A grant or a gift aid is, in essence, a sum of money given to a person or business by federal, state governments, or private organizations. These are handed out on the basis of financial needs. The most attractive thing about grant funds is that they do not have to be paid back as long as the recipients meet all eligibility obligations. This also makes them difficult to access for a large number of people and businesses. There are specific criteria that need to be met to qualify for almost all types of grants.
Some of the common factors that are considered while approving small business grants include the following:
- Size of business
- Owner information (especially important for grants aimed at minorities and other groups)
- Ownership structure
Some of the common factors that are considered while approving eligible students for grants include the following:
- Student’s income, if any
- Family size and number of siblings in college
- Family income and expected family contribution
- Tuition fee
It’s worth noting that each financial aid and grant program will have its own set of rules when it comes to determining eligibility. It’s important to go through these before applying.
- READ MORE: What Grants do I Qualify for
How Do Business Grants Work?
The idea behind government grants is to support specific businesses and further their business goals. These business goals, in turn, are in line with government objectives of creating employment, supporting grassroots-level businesses, or aiding minorities and other groups.
Federal grants are the most popular ones, but also the most competitive for businesses. That’s why many businesses try to secure local government aid or grants issued by corporations. In almost all cases, these grants don’t have to be paid back.
When it comes to business grants offered by private corporations, businesses may benefit from additional benefits. For example, the FedEx Small Business Grant Contest provides entrepreneurs with $4,000 in FedEx print and services.
Types of Grants for Financial Aid
As mentioned, grants are given to persons and businesses as a form of financial aid. In the United States, student grants and small business grants are the most common options available. Let’s take a closer look at the different types of grants for financial aid.
- Small business grants: Small business grants are generally aimed at supporting businesses run by minorities, veterans and nonprofits. These grants are issued by federal, state and corporations.
- Federal student aid: While most students apply for federal student loans to pay their college tuition, there are some federal grants available to deserving students. There are four types of federal student grants available today. These are Federal Pell Grant, Federal Supplemental Educational Opportunity Grants, Teacher Education Assistance for College and Higher education grants, and State issued grants.
- READ MORE: Types of Grants
Do Recipients Have to Pay Back Grants?
Whether it’s a federal grant or an aid issued by large corporations, recipients are not expected to pay back the money. That’s because these are grants and not loans.
To secure grants, recipients have to meet a long list of eligibility criteria. They must demonstrate financial difficulty to cover expenses and explain why deserve the entire grant. If later their circumstances change, these recipients may have to repay grant money.
When Does a Grant Have to Be Paid Back?
Unlike federal loans that need to be repaid within a certain time frame, recipients are not expected to repay grants. That being said, it’s important to meet eligibility requirements. Failure to do so may result in the grant getting canceled and the recipient having to pay back grants.
Let’s look at some of the circumstances where a student may have to return the grant money.
- Withdrawal from the school or program: If the student drops out before completing at least 60 percent of the semester, the federal government will ask them to pay back 50 percent of the financial aid offer.
- Change in student’s enrollment status: In the event of a change of status in enrollment after receiving the Pell grant, the student will be required to return the difference. Failure to pay back the Pell grant money will result in a Pell Overpayment on the record, which in turn will disqualify the student from future federal aid programs.
- Other aids for financial support: If after getting the pell grants, a student manages to secure other non-federal grants, the government may ask for payback.
- READ MORE: What Grants do I Qualify for
Can Businesses Receive Money from the Federal Government?
The federal government is focused on supporting small businesses, especially in the post-pandemic period. That’s why the government has introduced a number of financial aid programs that are designed to offer free money to small business owners.
How Do You Qualify for Small Business Grants?
To meet your financial need, you may apply for federal or state grants. But keep in mind that you must meet the grant eligibility criteria. Given that there are several federal, state and private grants available to businesses, the first step to qualifying for the right one is research. The more you research the easier it will get to narrow down the right grants where you are most likely to qualify.
You can check the Small Business Administration website where you will find information on all kinds of private loans and grant programs.
The next step is to draft a comprehensive business plan that explains what you do and how you expect your business to grow. The business plan should include information about your products and services and explain your financial need to grow the business. A comprehensive business plan sets you apart from the rest and increases your chances of securing the grant money.
Once you have the plan and a short list in place, you should go ahead and start applying.
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