ThesWhat Is A Business Grant?
What is a business grant? Why might a business grant be the right choice for you
According to the Chamber of Commerce, around 400,000 small businesses open every year in the United States. While 80% of them survive the first year, about 50% can hardly reach the five-year mark.
There are many reasons why a business fails. Including competition, lack of foot traffic, and mismanagement. When it comes to kick-starting a new business venture, originality and traffic are not enough.
An innovative idea is nothing without the proper funds. Financial support is needed for survival, but also for maintenance and expansion.
Finding The Money For Your Startup Business
Most entrepreneurs are not trust fund babies with money to spare. So, where do they get their funding from? Lots of small business owners apply for business loans. These Loans consist of borrowed capital, which creates a debt that is paid back with interest across an agreed period of time.
While business loan options are plentiful, the process can be complicated. The wait is often long, and a low credit score can result in an application denial. Those who are lucky enough to receive the loan are also at risk. Variable interest rates fluctuate, making every loan payment increasingly pricier. If the business is unable to pay back the loan, the borrower can be personally responsible for the debt, risking their personal property.
Business Grant 101
As an entrepreneur venturing into a new business, you might be looking for funds. At that point it is important to understand what is a business grant. Are you afraid of falling into the loan debt spiral? Do you just not want the pressure of loan repayments when you are still figuring things out?
A small business grant might be the right choice for you. While they are more competitive and less abundant than loans, grants can offer great benefits at little to no cost. What do they consist of? A business grant is a free sum of money that offers the financial assistance every venture needs to grow. Yes, you read that right. For free.
The objective of the award is to eliminate the need for debt, allowing the business to grow and flourish. While giving entrepreneurs more flexibility and time to do what is right for the business, rather than being forced to make rash decisions just to bring a dollar in, at the potential cost of the brand and early users.
There are two main business grants divisions: governmental and private. As the name suggests, governmental grants are supplied by the American government. A percentage of the governmental budget is set apart every fiscal year for business grants. This sum is distributed at federal, state, and local levels. Every level, accordingly, has a different degree of competition and budget amount. These grants can be awarded by different federal grant-making agencies depending on the project.
Private grants are awarded by private organizations, like corporations, nonprofits, and private banks, as well as schools. They all vary in amount and can be received through competitions, applications, and portfolio or business plan submissions. For example, FedEx annually hosts a Small Business Grant Contest. The National Association of the Self-Employed (NASE) awards a monthly grant of $4,000 to one of its members. Many private grant-makers include their awards in catalogs like the Foundation Directory Online or the Council on Foundations website.
Whether private or governmental, business grants can be very selective which is a critical factor to know when understanding what is a business grant. Loans have no application requisites besides a good credit score, income and assets, making it relatively straightforward to apply for one through most national banks, a few private businesses, or credit unions.
Grants are a little more limited. Both private and governmental grant-makers reserve the right to award their grants subjectively. Every grant listing is created for a specific group.
Governmental grants are more often given to non-profit organizations, scientific and medical efforts, and educational endeavors. Within those groups, grants are made specifically for minority groups, women, and veterans.
Private grants are designed for businesses that portray the mission and vision of the grant-maker and meet the set criteria. For instance, you are starting a sport’s related business and there is a non-profit organization that hopes to further athletics in the community. You may be the perfect candidate for their grant.
Often corporations will offer business grants to applicants working on a product that could benefit the grant-maker or be mass-produced in the future. Comcast’s Innovation Fund offers financial support to entrepreneurs developing open-source software projects. Other limitations may apply within both grant groups, including time in business and the number of employees.
How To Get A Business Grant
Now that we know what is a business grant, how do you get one?
It typically starts with the process known as “grant writing.” The first thing to do is think about how your business and its services benefit your town, community, and clients. Additionally, know how much money you would need and what expenses would the funding go to. Be specific. This will help you better understand the kind of grant your project requires.
Then choose a type, governmental, or private. Once you have chosen, use one of the aforementioned online catalogs to find the grant that best matches you. Every listing will require a different collection of documents, often including business plans and financial projections.
Grant writing will take time. Not every business grant will be meant for you. If you find a complementing listing, a few months might pass before you hear back from the grant-maker, and the answer will not necessarily be the one you were hoping for. Don’t give up. Follow up. When the grant-making agency decides you are the right match, they will contact you and fill you in on how to receive your award and report back.
Hopefully this post provided some perspective on what is a business grant.
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