How Do Business Grants Work?

In the U.S. thousands of grants are available to small businesses, which are a vital part of the economy. After all, nearly half of all jobs are in companies with fewer than 500 employees. And these companies make up over 43% of U.S. GDP. That gives them an outsized role in innovation, job creation, and economic output.

From technology-focused grants to those created for minority-owned businesses, grants are available based on a wide spectrum of business types, stages of growth, and funding needs. Often, they are driven from government organizations, nonprofits, and academic institutions.

Key Takeaways

  • Over 5 million businesses were created in the U.S. in 2021, a 53% rise from 2019.
  • A broad spectrum of grants are available for small businesses, although securing funding can be competitive. 
  • Organizations that provide grants for small businesses include the U.S. Small Business Association,, the Minority Business Development Agency, the State Trade Expansion Program, along with several other nonprofit and academic funding resources.
  • In many cases, business grants are not required to be repaid, providing an attractive source of funds to grow or expand a business.

What Is a Business Grant?

At the heart of small business grants is promoting entrepreneurship. These grants are offered by the U.S. government and other organizations to a variety of small business owners including individuals, businesses, or corporations.

To help companies grow their business, government funding programs from state to federal levels are available. Funding for small businesses can take the form of loans, grants, and investment capital. 

Corporate and nonprofit grants range from sources including the Halstead Grant and the National Association for Self-Employed. Along with this, the Amber Foundation provides grants for women-run businesses. Operation HOPE is an organization focused on supporting Black-owned businesses, providing a range of funding assistance and programs.

Often, business grants do not require repayment, but securing funding can be competitive and requires applicants to meet certain criteria and adhere to strict requirements.

How Does a Business Grant Work? 

To apply for a business grant, it’s important to know the steps and criteria for the type of funding for which you are applying.

For government grants, first ensure that your business meets all of the requirements. For instance, it may not be suitable for funding if you are looking to cover payroll costs, other operating costs, or paying off debt. 

Also be aware of the time involved in applying for different grants. Often, they can require a lot of paperwork that details your business’s reasons for applying for the grant, market demographics, or the nature of your product or service. Additional documentation may ask for details on your finances, marketing, purposes of using the funds, and other details.

The good news is there are countless resources for funding opportunities, including the following:

While business grants are typically not required to be repaid, they are often taxable. Details on the tax payments on different grants usually can be found on the business grant agreement. Or, the funding organization can provide tax information if it is not explicitly stated in the agreement. In addition, the IRS and state Department of Revenue websites provide information on tax responsibilities.

As a rule of thumb, it is good to set aside a portion of the grant for taxes. Keeping clear financial records can help you prepare. Tax deductions may also be available on business grants, which may be worthwhile if they are applicable to your business.

Types of Business Grants

Generally speaking, there are five main types of grants based on their funding source. 

Federal grants

The primary source for federal grants can be found at As of August 2023, there were over 900 grants available to small businesses. These include grants issued directly or indirectly to small businesses.

Consider one example, where a grant is available for small businesses working on research on office space to residential conversions. Total funding for the grant is $860,000 through the Department of Housing and Urban Development.

Other grants across may fall under agriculture, business, and commerce. For instance, a separate grant with a total program funding of $13.8 million is focused on diversifying the semiconductor supply chain for national security purposes, “to support the development and adoption of secure semiconductors, [and] semiconductor supply chains.” It’s worth noting that the vast majority of these grants are designed to support research.

At the same time, the Small Business Administration (SBA), run by the federal government, offers two main programs designed for companies building innovative solutions in their field. 

The Small Business Innovation Research Grant (SBIR) program is for businesses that are working with nonprofit organizations or universities that drive innovation. Each year, it awards $3.2 billion in funding for grants that range from $50,000 to $750,000 apiece depending on the phase of the research project. In some cases, grants awarded may be in the millions.

An example of an SBIR grant can be seen with a solar company Ubiquitous Energy that worked with the National Science Foundation to bring its renewable energy technology to expand operations for the commercialization of solar technologies. In 2014, it was awarded a SBIR grant of $750,000 to help develop the technology. Since then, the company has raised an additional $25 million in private funding alongside support from the SBIR grant.

The second primary grant program from the SBA is the Small Business Technology Transfer (STTR) program. Like the SBIR, it awards grants to businesses working with nonprofits, including academic institutions, that are designed to bring advanced technologies to market. Each year, $453 million is allocated for these programs. 

The main difference between an SBIR grant and an STTR grant is that for an SBIR grant, the small business has the option to work with a nonprofit partner, while for an STTR it is a requirement.

State grants

U.S. states offer a variety of grants to small businesses. Your local chamber of commerce can be an excellent resource to learn more about these types of grants, which may be industry-focused with the goals of promoting job creation or aligning with economic development. 

For instance, Massachusetts Growth Capital Lending Projects provide loans between $5,000 and $2 million for businesses to finance commercial real estate purchases for business purposes.

Municipal grants

These types of grants can be found at the city or county level. Often, they don’t require a research component. Small business development centers, such as the San Diego & Imperial Small Business Development Center, provide grants to companies to support job creation and innovation. They also may provide funding for companies looking to expand into international markets.

Corporate grants

Many companies offer small business grants, such as the FedEx Small Business Grant Contest, which awards $50,000 in funding to companies with under 99 employees; the Venmo Small Business Grant, which provides $10,000 in funding to companies with under $50,000 in annual sales with fewer than 10 employees; and the National Association for Self-Employed, which awards $4,000 in grants to its members for business development activities.

Nonprofit organization grants

Nonprofit organizations and foundations offer grants as well. There are many examples, including the Foundation for a Just Society, which focuses on LGBTQI- and women-run businesses, and the BIPOC Small Business grant, run by, which provides grants for business owners who are Black, Indigenous, or people of color.

How Do You Qualify for a Business Grant?

To qualify for a business grant, carefully read the details of the grant requirements. Often, the application will state requirements covering the number of employees, annual revenue, where the business is registered, and grant objectives. Many federal grants require a small business to partner with a nonprofit organization, which is also important to consider, depending on the type of grant for which you are applying.

What Are the Chances of Receiving a Business Grant?

The odds of successfully receiving a business grant vary based on the source of the funding. Federal grants are among the most competitive, but funding awards can go into the millions depending on the nature of the project or program. Grants coming from the state or municipal government may be less competitive, along with corporate grants or those stemming from nonprofit organizations.

Where Do You Find Business Grants?

There are countless resources for business grants available to entrepreneurs. Among the many sources that offer funding for entrepreneurs are the Small Business Administration,, the Small Business Innovation Research program, Small Business Technology Transfer grants, The Minority Business Development Agency, The Amber Foundation, local chambers of commerce, the FedEx Small Business Grant contest, and the Venmo Small Business Grant, to name a few.

The Bottom Line

There are hundreds of grants available for small businesses to support entrepreneurship, job creation, and a broad spectrum of objectives. This is because small businesses play a critical role in the economy, driving economic growth and spurring innovation.

These grants are offered by government, nonprofit, and corporate sources, among others. Often, applications can be rigorous and time-intensive, but the payoff can range between the thousands and millions. Furthermore, grants often do not have to be repaid.

For business owners looking to access funding, it is worth paying close attention to grant requirements and building connections, whether with your local chamber of commerce or with contacts at state agencies. These can provide key information on grant funding to help your business grow.


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