Every citizen of the US looking to launch a startup can find the startup business grants extremely useful. Aimed at promoting entrepreneurship, these grants are offered by the government at various levels, other organizations, individuals, corporations, or businesses. Here, we shall look into startup business grants, their working, types, qualifications, applications, alternatives, and so on.
What Is a Startup Business Grant?
A business grant in the US is a financial aid for businesses that don’t need to be repaid. These grants are available for different business types, at the various stages of their growth and funding needs. Usually, the funding for businesses is in the form of grants, loans, and investment capital.
Although these grants are extremely impressive not needing to be repaid, are granted on the application having all the requirements and strictly adhering to the specified conditions.
How Does a Startup Business Grant Work?
The grants offered by the government initially ensure that the business meets all the specified requirements and is not looking to cover operating costs, payroll costs, or paying off any debt. These require quite a load of paperwork that requires you to detail the business status, need for a grant, nature of the product or service offered, market demographics, and so on. In addition to these, you may have to provide documents on your finances, marketing, etc.
These grants are a source of funding that can be taxed, the terms regarding which can usually be found in the startup business grant agreement. For further inquiry on the tax obligations refer to the websites of the Internal Revenue Service(IRS) and the Department of Revenue. So it is advisable to always keep your finances debt-free and also see if any of the tax deductions are applicable to your business as it can be an added advantage.
Types of Startup Business Grants
Business grants can basically vary based on the sponsor. Based on this funding source, the grants can be classified mainly into five:
- Federal Grants
As of 2023, there are around 900 grants issued directly or indirectly to small businesses. The list of these grants can be accessed at grants.gov. For instance, the Department of Housing and Urban Development(HUD) provides grants for a small business that is researching the conversion of office workspace into a residential area. Whereas other grants are given under various categories including commerce, agriculture, and business. Most of the grants are provided for research purposes and involve higher amounts when it is aimed at helping the public sector such as national security.
Meanwhile, the Small Business Administration(SBA) operated by the federal government has two programs to offer for companies that hope to build innovative solutions in their corresponding fields. The Small Business Innovation Research Grant(SBIR) is another grant offered at the federal level for businesses working alongside non-profit organizations or universities for innovation. The donations made from a total of $3.2 million range from $50,000 to $75,000 for a business depending on the phase of the research work and sometimes even cross millions.
The Small Business Technology Transfer(STTR) program, part of the SBA is similar to the SBIR as it also awards grants to businesses working with nonprofit organizations and academic institutions. - State Grants
The US states offer various grants to startup businesses which can be industry-focused with the primary objective of promoting employment creation and nurturing economic development.
One such instance is the generous loan of $5,000 to $2 million by the Massachusetts Growth Capital Lending Projects to businesses for making real estate purchases. - Municipal Grants
These are grants awarded by the government at the city or country level. These are not research-oriented grants instead, they are given to businesses and companies with the primary objective of job creation and innovation also considering the companies looking to expand their markets internationally. - Corporate Grants
These are the grants offered by individual companies to small businesses. Some of these are:- Venmo Small Business Grant – startup businesses with annual sales under $50,000 and less than 10 employees are awarded $10,000.
- National Association for the Self-Employed – grants of $4,000 are given to the members of this association for business-related development activities.
- FedEx Small Business Grant Contest – companies with fewer than 99 employees will be awarded $30,000.
- Venmo Small Business Grant – startup businesses with annual sales under $50,000 and less than 10 employees are awarded $10,000.
- Nonprofit Organization Grants
There are various programs offering grants by several nonprofit foundations and organizations. This includes:- Foundation for a Just Society – this organization focuses on the LGBTQI- community and businesses run by women.
- BIPOC Small Business Grant – this program run by AnnuityFreedom.net awards grants to businesses run by Black, Indigenous, or people of color.
- Foundation for a Just Society – this organization focuses on the LGBTQI- community and businesses run by women.
How to qualify for a Startup Business Grant?
With grants being a source of free money for your startup, they are extremely competitive. The grants by the federal government have the most competition whereas it is lesser for those offered by the State and other local organizations.
Follow these tips to make your application a strongly appealing one among the others:
- Emphasize the grant objectives – make sure that you have referred to the grant’s objectives as it can grab the sponsor’s attention.
- Well-formed Business Plan – take all the time you need to develop a well-written and developed business plan that is of the highest quality, polished, and detailed as it is an important part of the application.
- Lay down the purpose of the grant – each grant is offered for a specific purpose. Make your business plan detailed enough with all the explanations on how you are planning to use the grant for your startup business.
- Funding match requirements – although not for all grants, some require you to match your funds with that of the sponsor. The key is to identify if you can actually come up with the money before applying.
- Early application – many of the grant programs are based on a finite pool of money. On running out of the money for the year’s grant, no further applications will be accepted. Therefore send in your applications at the earliest.
Application for a Startup Business Grant
The specific steps to apply for a startup business grant depend on the sponsor or lender. Yet the general steps for the application are as follows:
- Make sure you are eligible – each grant has its own goals and a list of requirements put forward by the organization that need to be accepted by the one seeking the grant. These requirements that define your eligibility include the size of the business, activities involved in the business, the minimum amount of revenue brought in by the business, the owner’s gender, and so on.
- Collect the required documentation – before beginning the application process make sure that you have all the required documents that are necessary for that specific lender. The most asked information required as part of the grant application can be:
- EIN- Employer Identification Number
- DUNS (Data Universal Numbering System) number
- Business plan
- Revenue history of the business
- Business organizational chart
- Tax returns
- Bank statements
- Carefully fill in the application – The complexity of the application form can vary based on the grant amount, type, and chosen sponsoring organization. For example, the grants offered by the government have several steps involved in the application for the grant which is pretty time-consuming.
Where to Find Startup Business Grants?
The process of finding a startup business grant can be tricky but you can succeed once if you put in a little bit of time and effort. The initial step would be to enquire locally at your nearby small business development centers and business exhibitions. The next option would be to look online for a startup business grant. Visit the grants.gov to see the list of all currently available government business grants. A list of other startup business grants that you can find online are listed below.
| Organization | Grant | Available for |
| National Association for the Self-Employed | Up to $4,000 | Self-Employed entrepreneurs |
| FedEx Small Business Grant | $5,000 | Small business owners |
| The Second Service Foundation | Up to $15,000 | Active-duty US military entrepreneurs, Veteran, or reserve |
Alternatives to Startup Business Grants
Although startup business grants are one of the best ways of receiving funds for your business, you might not get them even with a strongly appealing application. As these tend to be hard and competitive to win, you must look out for the other possible alternatives.
- Business loans
You can choose small business loans if you are in need of working capital for your startup. But it won’t be easy to find them as lenders like banks will not be interested as you are seeking loans for startup businesses. Still, you can approach online lenders like Lendio, Bluevine, Fundbox, and Kiva for business loans. - Crowdfunding
This is the best choice to go for if your startup business has a strong fanbase. It is free money that you needn’t pay back unlike a loan but need to give the supporters that offer the fund something in return which can be equity shares, debt notes, or exclusive event access from the business. The terms vary with the crowdfunding platforms used like StartEngine, Kickstarter, and Indiegogo. It is advisable to use this strategy If you have a product-based business rather than a service-based one. - SBA microloans
If you are looking either to launch your new business or expand the existing one, SBA microloans can offer a large sum of up to $50,000. Usually, economic development organizations and nonprofit financial institutions act as intermediary lenders for these loans. These lenders are responsible for administering, underwriting, and issuing their own microloans. An average of $15,644 was given away as microloan in the fiscal year of 2023. - Business credit cards
These are other sources to find funding for your startup that can be accessed with your startup’s basic information such as name and industry along with your personal credit score. While using business credit cards one must be extremely careful as if you are making larger payments with them and can’t pay it back on time, you will have to pay the amount along with the accumulating interest. Yet these are ideal to use for daily expenses that aren’t big. The application for this credit card requires you to sign to be responsible for any debt that the business fails to pay. - Friends and Family
This is one of the most informal ways of gathering funds for your startup. You could ask for either a loan or trade a certain percentage of the shares or profit of the company to your family members, acquaintances, or friends. As these could put your relations under stress, it will be better if you get the terms and conditions along with the consent of both parties in writing.
Conclusion
With the aim of supporting employment opportunities creation, entrepreneurship, innovation, and so on, there are several hundreds of startup business grants for your small business which can be a great head start for your venture and also for expanding the same. National-level grants are available to promote small businesses as they promote the overall economic development and innovation of the country. Yet the grants offered can be based on specifics and may be highly time-sensitive so it is crucial to look out for opportunities and build connections with bodies like the Chamber of Commerce or state agencies to stay informed regarding the grants that may range from thousands to millions.
Also Read: Unlocking Opportunity with Libro Financing: Your Comprehensive Guide to Success in the US
Frequently Asked Questions
Where can I find grants for a small business startup?
Small business startup grants are offered by the government and state agencies, private corporations, and non-profit organizations. It is advisable to take guidance or assistance from local business development centers.
Is a Grant a Form of Income?
Yes, a grant is a form of income that can be taxed both at the federal and state levels unless the law states otherwise.
Is a Grant a Loan?
No, a grant isn’t a loan as you are not required to pay back the money with interest as for a loan. In other words, a grant is a one-time monetary benefit that is taxable.
Life is a journey, and finances are a big part of that ride. I’m Neerthu, and I believe everyone deserves to feel confident and empowered about their money. Whether you’re a seasoned investor or just starting out, I’m here to share my insights, experiences, and money mistakes with practical takeaways made from the current finance affairs along the way. Join me as we demystify financial planning, debunk common myths, and make smart money moves together.