Welcome to Business Grants 101, Penny Hoarders.
I’m starting this class with an analogy: Small business grants are to small businesses as scholarships are to colleges.
I always hated analogies, but this sounds promising, right?
If you’re looking to start a business — or fund an existing one — a grant could be a great financial solution.
Read on to learn more (and decode that pesky analogy — sorry, guys).
What’s a Small Business Grant?
Let’s consult the expert.
“There’s no obligation to pay back anything, and you’re not giving away any ownership in your company,” he says. And if you are? It’s not a grant.
So just like a scholarship (and unlike student loans), you’re not required to return the money, nor are you expected to pay principal or interest. Nor are you required to give up part of your company — or your educated brain.
However, similar to a scholarship, you’re often expected to report your progress and prove the money’s being put to good use. Fortunately, this doesn’t require maintaining a certain GPA.
Types of Small Business Grants
To jump-start your search process, it’s important to understand where your grant money might be coming from — usually it’s either from the government or a private entity.
You’re likely going to have trouble finding government grants because they’re funded by your tax dollars, and, well, the rules about who gives and receives this money are pretty strict.
Shelton encourages us to think about it this way: What if you use a government grant to open a craft chocolate shop right down the road from a big competitor? You bet your competitor will be mad that the government is funding the new kid on the block.
Besides, that’s our tax money, and not everyone likes chocolate.
This is why most government-funded grants go to nonprofits. So if you’re a nonprofit, great. Check out grants.gov for some good opportunities.
But if you’re in the business of making money, you’ll want to look into private grants.
“That’s where the action is if you can find them,” Shelton says.
How to Find the Best Private Small Business Grants
If you can find them, Shelton says.
I’m not going to lie — it’s difficult. I spent several days researching small business grants, and I felt as though I was drowning in the black hole that is Google.
But Shelton made me feel better.
“You have to question, why would [a company] give a grant?” he says. “There are no charitable deductions, no equity invested in the company, and you’re not paying [the grant] back, so it’s not a loan.”
So, really, there’s no big incentive for entities to hand out money. But of course there are those gems — usually big-name brands — that extend a helping hand.
Lucky for you, I found three.
3 Small Business Grants to Keep on Your Radar
Before applying to a grant, be sure to read the fine print. I can’t stress that enough.
And give yourself plenty of time to apply. Like scholarships, these grant applications can be real hair-pullers. They’re also super competitive, so spend time perfecting every detail.
If you win this contest, you’ll receive not only a paycheck, but also become a member of a strong, entrepreneurial community where you can share and gain a wealth of knowledge.
This year, 10 businesses were awarded up to $25,000. Worth the application? Heck yeah.
Head on over to the contest page to see this year’s range of winners, from a business to help homeless and disabled artists sell artwork to a company that designs bicycle racing wheels.
Go ahead and make a reminder for yourself to check back in for the spring 2017 contest announcement.
Yes, even a beer giant offers small business grants.
This annual competition gives entrepreneurs a chance to win more than $200,000. And, like the FedEx contest, this isn’t just a funding opportunity. You’ll be able to attend business seminars and rub elbows with business superstars like Daymond John.
This year, the application period ran Feb. 11 to April 8, semifinalists were announced in May, then people pitched their business ideas live in July. (I’d need a Miller for that.)
The national finals are in September and we suspect the timeline will be similar for 2017, so be sure to pop in for updates. In the meantime, start drawing up your business plan.
Context: Zach is the founder of Fusian, a restaurant chain. He applied for a small business loan and couldn’t snag one, which sparked his cousin Jared to investigate.
In short, Jared created Fundera, a site to help small business entrepreneurs (and worth checking out). After its establishment, Fundera created the Zach Grant.
For this grant, you won’t need to lace your pitch with business jargon. Instead, record a three-minute video explaining why you created your small business. Then, follow the subsequent instructions. You could win $2,500.
The grant is awarded every year, so keep posted.
Other Small-Business Grants and Options for Funding
Because grants can be difficult to find, Shelton offers other suggestions.
Wherever you’re located, check with your county’s economic development department. It won’t offer you a grant, but sometimes it offers low-interest loans. After all, many cities are in the business of growth, so they might want your business.
There’s also something called HUBZone, which stands for Historically Underutilized Business Zones. The program’s part of the U.S. Small Business Administration and encourages small companies to set up shop in disadvantaged areas. This allows areas to increase employment rates.
“It fits many people’s agendas,” Shelton says.
Your Turn: Have you ever applied for a small business grant?
Carson Kohler (@CarsonKohler) is a junior writer at The Penny Hoarder. After recently completing graduate school, she focuses on saving money — and surviving the move back in with her parents.