What is a Grant?

what is a grant

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“What is a grant?” you might ask. At its core, a grant is essentially free money that doesn’t need to be repaid. Business grants serve as a viable alternative to traditional funding options and present a remarkable opportunity for businesses to secure funding.

Whether it’s to offer financial assistance or to fund research and development, grants play a pivotal role in establishing and expanding businesses. In the realm of financial support, subsidies and grants stand out as some of the most advantageous methods

What is a Grant and How Does it Work?

Simply put a grant is money that is given to a person, business, or corporation from federal, state, local governments, nonprofits, or corporations. Grants are one of the main small business funding options.

Because they do not require repayment of any kind making them an attractive financial consideration for entrepreneurs and small businesses for start-up, growth, or expansion.

Usually, a grant becomes available when a government agency, nonprofit or private business chooses to set aside grant money for an area of concern of their choice.

This could be to encourage minority entrepreneurship in a community, stimulate small businesses in communities, or reward innovation. Once the opportunity is created, applications are made, award decisions are made, and the money is allocated.

what is a grant

The Strategic Value of Grants

Beyond the immediate financial relief, grants carry strategic value for recipients. They enable organizations to undertake projects that might have been out of reach due to budget constraints, thereby fostering innovation and allowing for the exploration of new ventures.

  • Innovation and Research: Grants often fund projects that push the boundaries of technology, medicine, and social services, contributing to societal progress and the advancement of knowledge.
  • Community Impact: Many grants focus on projects that have a direct positive impact on communities, such as improving public health, education, and environmental sustainability.
  • Economic Development: By supporting small businesses and non-profits, grants play a crucial role in economic development, creating jobs, and enhancing the quality of life in various communities.

Reasons to Get a Small Business Grant

Navigating the waters of business ownership can be challenging, and finding ways to fund your venture is a pivotal aspect of success. One such avenue that often goes unnoticed or underutilized is the potential of small business grants.

These grants can serve as a lifeline to startups and established businesses alike, providing financial support for various needs. Let’s delve deeper into the major reasons why obtaining a small business grant can be a game-changer:

It’s Free Money (Sort Of)

When we talk about business grants, we’re referring to a financial windfall that doesn’t come with the strings of debt. Unlike traditional loans that accumulate interest and require repayment, grants offer “free money” to fuel your business aspirations.

However, it’s essential to remember that this money is allocated for specific purposes. These stipulations ensure that funds are used productively, aligning with both the business’s needs and the grant’s intentions.

what is a grant

You Need Working Capital

Every business, whether a fledgling startup or an established company, understands the value of working capital. It’s the financial lubricant that ensures seamless daily operations.

Whether you’re looking to pay staff, replenish inventory, or invest in marketing, a healthy working capital is essential. Here’s where business grants can play a pivotal role.

They can offer that much-needed boost, allowing businesses to reinforce their operational foundation, adapt to new technologies, and even expand into franchising.

Buying more assets

Scaling up is an inevitable aspect of business growth. Maybe it’s the cutting-edge machinery that promises more efficient production, or perhaps it’s the addition of vehicles to boost delivery capabilities.

Whatever the asset, its acquisition often comes with substantial costs. While these investments promise significant returns in the long run, their immediate financial impact can be burdensome.

Grants offer an opportunity to bridge this funding gap, ensuring businesses can grow without straining their resources.

what is a grant

Starting a business

The entrepreneurial dream can sometimes be stalled by the harsh reality of startup costs. From renting a space and hiring staff to investing in initial inventory and marketing, the financial demands can be overwhelming.

This is where a business grant can come to the rescue. For many budding entrepreneurs, a grant can mean the difference between shelving their startup dream and turning it into a tangible reality.

It offers a financial cushion that can help navigate the initial turbulence of business setup.

what is a grant

To Expand Your Market

Venturing into new markets, particularly international ones, holds the promise of exponential growth. But this expansion is not without its challenges. It demands significant financial outlay and strategic resources.

Some business grants will let you expand into new markets. For example, the Small Business Administration’s (SBA) State Trade Expansion Program (STEP) provides financial awards to assist small businesses with export development.

Besides helping you enter international markets; through the grant program you get to participate in foreign trade missions; help you in marketing your products internationally; gain support with e-commerce capabilities and more.

Reasons to Get a Small Business Grant

  • It’s Free Money
  • You Need Working Capital
  • Buying More Assets
  • Starting A Business
  • To Expand Your Market

Different Grants for Businesses

As a small business owner, you have different grants available to you to fund your business projects as incubators, accelerators, or loan programs. Below are some grants available for small businesses and startups:

Type of GrantKey FeaturesBest For
Federal GrantsHigh competition, need to adhere to funding requirementsStartups, growth businesses
State GrantsSupports job creation and local economyBusinesses within specific states
Local Government GrantsLess competitive, focused on community improvementCommunity-oriented businesses
SBA GrantsOffers a variety, includes pandemic reliefDiverse range of small businesses
Corporation GrantsOffered by large companies, merit-basedStartups, expansion projects
Diversity GrantsPromote diversity, easier application processMinority-owned businesses
Nonprofit OrganizationsForward a specific cause, specific use requirementsEco-friendly businesses, research and development

what is a grant

Federal Grants

Federal government grants for small businesses offer funding to help launch or grow small businesses.

Usually, Federal domestic assistance grants offer the most money and come with a lot of competition this is because there is no need for eligible grantees to pay the funds back so long as the grant is spent following the funding requirements.

Make sure that your application for a government grant is well researched and clearly articulated. You can access a database for federal grants at Grants.gov.

State Grants

Each state understands the importance of small businesses in driving the economy forward. By fostering the growth of these entities, they can generate more job opportunities and enhance the overall economic health of the region.

State grants are financial instruments tailor-made for this purpose. They act as a financial booster to stimulate growth, while simultaneously ensuring that the state’s unique objectives and priorities are met.

These grants are carefully curated to address specific needs and challenges faced by businesses within the state’s territory.

If you’re a small business owner keen on leveraging this opportunity, start by exploring the official webpage of your state. This platform will provide insights into various grant programs that align with your business requirements and aspirations.

Local Government Grants

At the grassroots level, local governments play a pivotal role in nurturing and empowering small businesses. The beauty of local government grants is their specificity; they are curated to address the nuanced needs of the community.

As these grants are more localized, the competition is typically less fierce, offering a higher success rate for applicants. Moreover, these grants have a dual purpose. Not only do they fuel the growth of small businesses, but they also aim at bringing about tangible improvements within the local community.

So, if your business is geared towards making a positive impact in your locality – be it through community services, local job creation, or any other avenue that contributes to communal well-being – local grants can be a goldmine.

Research the offerings of your local government, and you might stumble upon a grant that’s a perfect fit for your business model.

what is a grant

SBA Grants

The Small Business Administration (SBA) is an independent federal agency set up to promote entrepreneurship and protect the interests of small businesses.

It offers a range of grants for small businesses, minority-owned businesses, veteran-owned businesses, eligible community organizations, and others.

Some of its grants are for research and development while others are designed to help small businesses become resilient.

The SBA has even provided pandemic relief to small businesses that were impacted by the pandemic through programs that include the Paycheck Protection Program (PPP), COVID Economic Injury Disaster Loan (EIDL), SBA Express Bridge Loans, and others. To access available grants go to the SBA’s grants page.

Corporation Grants

Government agencies aren’t the only source of small business grants corporations and large companies too through their philanthropic schemes offer small-business grants.

Many private corporations and non-profit organizations also offer private grant programs designed to help small business owners start and expand their businesses.

While some of them provide grants to nonprofits servicing specific industries only while others give to for-profit companies. These grants are given based on merit and application materials, like essays, testimonials, or proposals.

Some corporate grants to look into include FedEx Small Business Grant Contest, Visa Everywhere Initiative, and Amazon’s Black Business Accelerator Program.

Diversity Grants

Diversity grant programs are designed for the elimination of bias or the promotion of diversity by offering financial assistance. These grants provide funding to assist small businesses owned by women, minorities, those with disabilities, and age in a bid.

They often come with an application process that is easier to navigate and also offer some kind of technical assistance as well.

If you are a minority-owned small business you can access some grant opportunities at National Association for the Self-Employed (NASE), WomensNet Amber Grant, and The Coalition to Back Black Businesses.

Nonprofit Organizations

Driven by a mission rather than profit, nonprofit organizations often allocate resources to advance causes close to their heart.

These grants, while generous, usually come with well-defined parameters to ensure the funds are used in alignment with the organization’s core values and objectives. The grants can serve a myriad of purposes:

  • Local Job Creation: Recognizing the ripple effect of employment on the community’s well-being, some nonprofits grant funds to businesses that show promise in generating local jobs. By doing so, they aim to reduce unemployment and spur economic growth.
  • Research and Development: The world thrives on innovation, and nonprofits play a significant role in this. Grants could be directed towards businesses that focus on R&D, fostering breakthroughs in fields like medicine, technology, or sustainable practices.
  • Supporting Minorities: Equality is foundational to many nonprofit missions. To level the playing field, these organizations often provide grants to minority-owned businesses or those that serve underserved communities, ensuring they get the same opportunities as their counterparts.
  • Eco-friendly Initiatives: As global attention shifts towards sustainability, nonprofits are at the forefront of promoting green business practices. Grants in this sector help businesses adopt or develop eco-friendly technologies, sustainable products, or practices that significantly reduce their carbon footprint.

When considering a grant from a nonprofit, it’s essential to thoroughly understand the stipulated requirements and ensure that your business objectives align seamlessly with the grant’s intended purpose.

This not only increases the likelihood of securing the grant but also ensures a harmonious relationship with the grantor as you work towards mutual goals.

Navigating the Grant Application Process

The grant application process can be daunting, but understanding its nuances can significantly increase your chances of success.

  • Research and Preparation: Thorough research is crucial to identify grants that align with your organization’s mission and projects. Preparation involves understanding the grant’s objectives, eligibility criteria, and application requirements.
  • Crafting a Compelling Proposal: A successful grant proposal clearly articulates the problem your project aims to solve, the proposed solution, and the expected outcomes. It should also demonstrate your organization’s capacity to successfully execute the project.
  • Follow-up and Reporting: Once a grant is awarded, maintaining open lines of communication with the grantor and adhering to reporting requirements is essential. This not only ensures compliance but also builds trust and credibility for future funding opportunities.

Leveraging Grants for Sustainable Growth

Grants should not be viewed as one-off financial windfalls but as part of a strategic approach to sustainable growth. This perspective involves planning how a grant can be used not just for immediate needs but also to lay the groundwork for future projects and funding opportunities.

  • Strategic Planning: Incorporate grants into your broader financial and operational planning. Consider how a grant can help achieve long-term goals and address strategic priorities.
  • Capacity Building: Use grants to build your organization’s capacity, such as investing in staff training, technology upgrades, or process improvements. This enhances your ability to deliver on current projects and positions you for future success.
  • Community and Stakeholder Engagement: Engage with your community and stakeholders about the projects funded by grants. This not only builds support but also demonstrates the tangible benefits of your work, strengthening your case for future funding.

Maximizing the Potential of Grants

Grants offer more than just financial support; they provide a foundation for innovation, community development, and economic growth. By understanding the strategic value of grants, navigating the application process effectively, and leveraging funding for sustainable growth, organizations can maximize the potential of grants.

Whether you’re a startup, a non-profit, or a small business looking to expand, grants offer a pathway to achieving your goals while making a positive impact on society.

As the grant landscape continues to evolve, staying informed and engaged will be key to unlocking the transformative power of grants.

Is a Business Grant Worth It for Small Businesses?

Yes, a business grant can help offer that extra financial assistance to get your business up or running or humming. What’s great about a business grant is that they do not need to be repaid. This comes in handy for businesses that may have financing difficulties and face challenges in repaying traditional business loans.

In addition, business grants are relatively easy to find online and can sometimes come with additional resources such as training and technical support that can improve your business’ effectiveness.

Where to Find Small Business Grant Programs

There are various tiers of business grants available from the federal level to the local or county government level. Most of them are available online such as through Grants.gov, SBA’s grants page, or your local chamber of commerce’s website.


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Rob Starr Rob Starr is a staff writer for Small Business Trends and has been a member of the team for 7 years. He is a graduate of Ryerson University in Toronto with a Bachelor of Journalism degree. His print credentials include employment with various Toronto area newspapers and three works of fiction: The Apple Lady (2004), Creekwater (2006) and Sophistry By Degrees (2008) published by Stonegarden Press In California.