Small-Business Grants: How to Get Free Money for Your Startup

You might have hopes for world domination when you launch your startup, or at least market domination. It takes a lot of work to get such a business off the ground, though.

You can give your startup a financial boost and potential leg up over the competition by applying for a small-business grant. However, be warned: these grants can be elusive.

Luckily, there are ways to boost your chances of getting such a grant. Here’s a look at how to find one and what is needed for you to successfully obtain one.

How to find small-business grants

Contrary to popular belief, the federal government generally does not fund small-business grants directly. However, it does distribute funds to state and local governments, as well as through some government agencies. Each of these agencies, in turn, can develop their own small-business grant programs to which you can apply.

The best place to find small-business grants is through your local Small Business Development Center. These free or low-cost resources can point you in the right direction as to where and how to apply for grants.

Government-funded grants usually go to the types of businesses the federal and state agencies want to promote in the economy. For example, if a state wants to boost its agriculture business, it may offer more grants to agriculture startups.

A lot more grants are available to women, minorities, veterans and people who live in rural areas. Joanna Douglas, for example, won a $10,000 grant from the U.S. Department of Energy’s Energy Efficiency and Conservation grant program to start up her green cleaning business, Clean Affinity. “It was a nice added boost when starting a new business,” she says.

Non-government organizations (NGOs) and corporations also sometimes offer grants.

How to apply for small-business grants

Make sure you take the time to fully read through the grant program details before you apply. Taking the time to read through the requirements beforehand can save you many hours’ worth of work for something you’re not even eligible for. If you are eligible, make sure you follow the application rules to a T, otherwise, your application may land in the trash.

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How to make your grant application shine

Grants aren’t given out willy-nilly. To be successful, you’ll need to figure out how to make your application pop.

“Grant funders are looking for exciting ideas. The business needs to show buzz,” says Jeff Van Winkle, former Chair of the National Small Business Association. In Joanna’s case, she was able to demonstrate that with her innovative green business idea.

Still, grant funders don’t like taking unnecessary risks if they can help it. “Grants are given to businesses that demonstrate how they can leverage the grant with private funds to improve the local economy, either with employees or purchasing,” Van Winkle says. By showing the grant funders that you already have capital available and add real value to your economy, you’re more likely to get the cash.

Finally, it can pay to have someone help you out with your application (literally). Maybe you’re an excellent landscaper or an award-winning chef. That’s great, but people who win grants are also great writers. If writing isn’t your strong suit, it can help to hire a proven grant writer to craft your application for you.

What happens when you get a small-business grant?

First, pat yourself on the back. Then read through the documents. Most grants come with rules about how you can use the money, and you will be required to show proof to the grant funders. If you spend the money in a way that’s not allowed by the program, you will be required to pay it back. No one wants that, so make sure you fully understand the spending stipulations up front.

What are some alternatives to small-business grants?

Grants are hard to get, but of course, they aren’t your only options to fund your startup.

You also try crowdfunding your business on a platform such as Kickstarter. If you’ve got an innovative idea and a buzz-worthy profile, your chances of getting funding improve greatly.

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One of the most common ways businesses get started is by using personal savings. Of course, this can be cost-prohibitive if you’re starting up a big outfit, but if it’s a low barrier-to-entry business such as web design or home pet sitting, you may be able to fund it yourself.

You can always apply for a small-business loan. These can still be hard to get, but definitely not as daunting a task as getting a small business grant. You’ll be required to pay back the loan with added interest, so make sure you shop around before applying for a loan.

SuperMoney has a great collection of small-business lenders you can check out for the most affordable rates.

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