What Is a Small-Business Grant?
A small-business grant is an award, usually financial, given by one entity (typically a company, foundation, or government) to a company to facilitate a goal or incentivize performance. Grants are essentially gifts that usually do not have to be paid back.
Small-business grants are targeted to a variety of purposes, from starting a company or helping it run more efficiently to aiding its expansion. Grants are not simply free money, however. The funds must be used in accordance with the terms of the grant, and if they are not, they will have to be paid back—possibly with interest.
- A grant is a gift to an individual or company that does not need to be paid back.
- Grants usually involve a three-phase lifecycle: pre-award, award, and post-award.
- The five main grant types for small businesses are federal, state or regional, corporate, specialty, and startup.
- Grants are considered income and thus subject to taxation, unless the law says otherwise.
How Small-Business Grants Work
Grants are tailored to a specific purpose, and the application process is generally rigorous and time-consuming. The federal government delineates what it terms “the grant lifecycle,” which has three phases.
- Pre-Award Phase: During this phase the grant-awarding government agency decides what it wants to fund, announces a grant (or grants), and accepts and reviews applications.
- Award Phase: Applicants are told whether or not they have been approved, the agency works with the grantee(s) to finalize the legal framework for the funding, and the funds are disbursed.
- Post-Award Phase: A grants management officer is assigned to oversee grant compliance during the life of the grant(s) through regular reports submitted by the grantee(s) and on-site audits. Eventually, each grant is closed out once it is determined that the goals have been attained and the funds spent.
Non-federal grants, of course, may vary in how closely they are scrutinized and monitored, but the process remains largely the same.
Types of Grants for Small Businesses
There are at least five different general types of small-business grants, available from myriad grantors. Within these five categories are opportunities too numerous to elucidate in one article, and the categories can sometimes overlap.
The most comprehensive source for federal business grants is the government website grants.gov, which maintains a database of thousands of available business grants. GrantWatch is on online database of over 27,000 grants, including more than 1,000 small-business grants. It has a free membership, or you can pay for a subscription lasting a week ($18), a month ($45), a quarter ($90), or a year ($199), which provides added benefits such as keyword search and full grant info.
Here are some grant examples that will help you understand what kind of help is available and where to look for it.
Federal small-business grants
The U.S. Small Business Administration (SBA), a federal agency, is a principal source of limited small-business grants for certain defined purposes. These include:
- Research and development: If your business does scientific research and development, you might qualify for a grant from the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs.
- Management and technical assistance: The SBA’s 7(j) Management and Technical Assistance Program helps small businesses that give management and technical assistance and guidance to other eligible small businesses. The intent is to help them be competitive in landing federal, state, and local government contracts as a prime or subcontractor.
- Export development: The SBA’s State Trade Expansion Program (STEP) “provides financial awards to state and territory governments to assist small businesses with export development.” To date it has awarded more than $200 million to help small businesses learn how to export their products, participate in foreign trade missions, design international marketing products and campaigns, support website globalization and e-commerce possibilities, pay for subscription services provided by federal agencies, and participate in export trade shows and training workshops.
- Entrepreneurship promotion: These grants do not go directly to small businesses. Instead, they go to community organizations that promote entrepreneurship through counseling and training programs, including organizations that support veteran-owned and service-disabled veteran-owned businesses and government-sanctioned “small business development centers.”
The U.S. Department of Agriculture also has grants for rural small businesses.
- USDA rural business development grants: These USDA grants pay for technical assistance and training for small rural businesses, which are defined as having “fewer than 50 new workers and less than $1 million in gross revenue.” The money must be used for “projects that benefit rural areas or towns outside the urbanized periphery of any city with a population of 50,000 or more.”
Federal small-business grants cannot be used for starting or expanding a business.
State or regional small-business grants
As noted above, the SBA provides grant money through STEP and its Small Business Development Centers that eventually funds small business support and development on the state or regional scale. In addition, the U.S. Department of Commerce has two programs that fund a variety of grants distributed statewide or region-wide. They are:
- Minority Business Development Agency (MBDA): The MBDA serves minority business enterprises owned and operated by African Americans, Asian Americans, Hasidic Jews, Hispanic Americans, Native Americans, and Pacific Islanders. Through a network of business centers, specialty centers, and grantees, it offers at the state and regional level “customized business development and industry-focused services to provide greater access to capital, contracts, and markets.”
- Economic Development Administration (EDA): The EDA has a grant investment portfolio that ranges from planning to infrastructure construction designed to enhance “local efforts to build, improve, or better leverage economic assets that allow businesses to succeed and regional economies to prosper and become more resilient.” Its investment priorities include projects that advance equity for underserved populations and communities, recovery and resilience from economic shocks, workforce development, manufacturing, technology-based economic development, environmentally sustainable development, and exports and foreign direct investment. Its grants are competitive, and each state has its own agency.
There are also states and regions that offer small-business government grants. Here are just two examples from New York and Texas.
- Neighborhood business grants: The Citizens Committee for New York City (CitizensNYC) offers neighborhood business grants of up to $10,000 to “fill gaps in funding by prioritizing businesses owned by people of color, immigrants, and women.” These grants prioritize small businesses that give back to the communities they serve.
- Skills for Small Business grants: The Texas Workforce Commission (TWC) and its Skills for Small Business program has a budget of up to $2 million and provides grants for employees to pay for “training offered by their local community or technical college, or the Texas A&M Engineering Extension Service (TEEX).” To qualify, a business must have fewer than 100 employees, and the grant can be used either to train new workers (up to $1,800 per person per year) or improve the skills of current employees (up to $900 per person per year). Employees must be full-time workers.
Corporations may offer grants as a way to burnish their image since philanthropy usually plays well to the public.
Corporate small-business grants
Corporations are usually concerned about projecting a positive image to the public, and philanthropy is one way to do that. This can take the form of grants to worthy causes, often nonprofit ones, but it can also take the form of small-business grants. Here are but a few of what is out there.
- DoorDash Disaster Relief: The ubiquitous food delivery company maintains a relief fund that makes $10,000 grants to “selected restaurants across the United States, Puerto Rico, New Zealand, Australia, and Canada affected by natural disasters like fires, floods, and hurricanes.” The restaurant must have a brick-and-mortar location (and no more than three of them), employ 50 or fewer people, have been open for at least six months, and have revenues of $3 million or less per location.
- Visa Everywhere Initiative: The company behind the internationally accepted credit card stages a worldwide competition among fintech startups from five regions—North America, Europe, Asia Pacific, Latin America, and Central Europe, Middle East, Africa (CEMEA)—for a $50,000 Overall Winner grant. Visa is looking for companies that have “products that deliver innovative payment and commerce solutions to consumers and businesses.” Also available are an Audience Favorite grant of $10,000 and a Visa Direct grant of $10,000. Local and regional grants ranging from $10,000 to $40,000 are also awarded. Applications are closed for 2023, so get on your mark for 2024.
- FedEx Small Business Grant Contest: The famed delivery company offers grants to small businesses “to be applied toward growing or enhancing their business.” To be eligible, a company “must be for-profit, have a valid FedEx business shipping account number, currently ship with FedEx, and have fewer than 99 employees.” Grants of $30,000, plus $1,000 worth of FedEx Office print services were awarded to 10 small businesses in 2023.
Specialty small-business grants
All grants are targeted to a specific goal, but some are aimed solely at a defined group. It could be the LGBTQ+ community, veterans, or—as with DoorDash above and the SoGal Foundation below (see “Start-up grants for small businesses”)—restaurant owners (DoorDash) and self-identified Black women and nonbinary people (SoGal). Here are a couple of other examples.
- Queer to Stay Initiative: A joint venture of the Human Rights Campaign and Showtime, partnering with Visa, the Queer to Stay Initiative will award grants to at least 25 LGBTQ+ small businesses across the country in 2023. A prime goal is simply to keep safe spaces for the community open. You must be a U.S.-based for-profit business, primarily serve/cater to the LGBTQ+ community, and explain how you have been negatively impacted by the Covid-19 pandemic. Special consideration will be given to businesses that are community-owned. Application deadline is Aug. 31, 2023.
- Military Entrepreneur Challenge: Run by the Second Service Foundation, the Military Entrepreneur Challenge “is a nationwide grant program that gives veteran, military spouse, and Gold Star family entrepreneurs the opportunity to network, learn, and compete for capital to grow their small business.” You prepare a pitch for your business that must be delivered first to a panel of judges and then to a live audience. The judges decide who gets to the final round, and the audience decides the winner. Grant amounts and prizes vary based on event. In the upcoming 2023 Challenge round in Arlington, Texas, due to be held Oct. 4-6, cash grants are $1,000 or $2,000, plus a $5,000 PR package and a $25,000 in-kind legal services package.
Startup grants for small businesses
As mentioned above, federal small-business grants cannot be used for starting a business. Fortunately, plenty of other entities are more than happy to help out in that regard. Here are just three.
- Incfile’s Fresh Start Business Grant: Incfile helps birth small businesses by managing all the complicated filing and paperwork, offering tax advice, and providing other support services for nearly one million customers. Its Fresh Start Business Grant gives $2,500 to help start your business, as well as offering Incfile’s Gold plan for free, which usually costs $385 and includes incorporation and registered agent services plus tax consultation. There are three deadlines per year, with one still to go in 2023 on Sept. 30.
- Black Founder Startup Grant: The SoGal Foundation was formed in 2015 “to close the diversity gap in entrepreneurship and venture capital.” It has teamed up with sponsors such as Winky Lux, bluemercury, twelveNYC, Twilio, Walmart.org’s Center for Racial Equity, and others to offer $10,000 and $5,000 grants to people who “self-identify as a Black woman or Black nonbinary entrepreneur (inclusive of multiracial Black women and multiracial Black nonbinary folks).” Applicants must “have a legally registered business, plan to seek investor financing in order to scale, now or in the future, and have a scalable, high-impact solution or idea with the ambition to be the next billion dollar business.”
- Cincinnati Chamber Foundation Startup Grant: Thanks to a grant from the Johnson Foundation, this Ohio organization has established a $100,000 grant program “to support women-, minority-, or LGBTQ-owned small businesses that are opening in downtown, Over-the-Rhine, and Pendleton.” The goal is to support the revitalization of vacant retail storefronts in the city while creating new jobs and fostering minority-business growth. Grants of $5,000 and $10,000 are available.
Is a Grant a Loan?
No, it is not. A loan must eventually be repaid, usually with interest, while a grant does not need to be repaid.
Is a Grant a Form of Income?
Yes, it is, which means that it is considered taxable at both the federal and state level unless the law dictates otherwise.
Can You Pay Yourself With Grant Money?
This really depends on the grantor’s terms for the use of the grant, but it is possible if those terms allow it.
Does a Grant Have to Be Paid Back?
No, it does not, unless the grantee fails to satisfy all the obligations of the grant.
The Bottom Line
Small businesses are an important component of the American economy, which is undoubtedly why there is such a plethora of support for them in the form of grant money. That support can come from the government—federal, state, or regional—corporations, private companies, nonprofit foundations, and other entities. It usually must be used for targeted goals and is often aimed at specific communities. So don’t by shy about it. If you and your small business are in need, go out and find the grant that’s designed for you.