We commonly field phone calls from individuals looking for grants that will help them start a business. The notion of getting free government money is certainly attractive, indeed, so attractive that is has become a common myth.
The reality is that grants for starting and running businesses are available only for relatively few types of businesses—unless the “granting agency” is a wealthy friend or relative. In that case, “angel investor” is a more appropriate term.
If you’re an entrepreneur, you should be applauded for your spirit. We have included some ways to help get you started below, even though grants (our business) are not at the top of the list.
The origin of the myth
There used to be a string of late-night infomercials promising to “sell the secret” of how to obtain government grant funding to start a business. A lot of people must have bought those books given how the commercials would not stop. We bought some, out of curiosity—it’s our business after all. The examples we reviewed were compilations of numerous federal funding sources, with little to no guidance in selecting and applying for the grants. Much of the same information these dubious organizations sold was (and still is) freely available on Grants.gov, and is generally unusable by entrepreneurs. While there are a number of government grants available, applicant eligibility is highly specific and rarely open to individuals and budding business-owners. While the infomercials finally died of natural causes, the myth of “free money” lives on, zombie-like, feeding off the innocents.
Grants are available to support businesses in only a few industries.
The Small Business Innovation Research (SBIR) program is a highly successful federally funded grant program designed to assist small business in developing new technologies. Eligibility depends on the size of the business, the work being conducted, and the research and development needs of eleven different federal agencies. (If you are interested in learning more about SBIR grants, contact us – we have helped technology businesses receive millions of SBIR dollars). Other business sectors that might be eligible for grant funding include those in working in the arts, or in the environmental or educational sectors. For-profit businesses outside of these eligibility pools are unlikely to find sources of grant funding. Non-profits are much more likely to be funded, as are schools, local governments, social agencies, and other entities.
There are other options, but the amount of funding available is less.
There are some organizations that are focused on assisting entrepreneurs, but efforts are often limited geographically. For instance, the SBA Prime Grant Program provides funding to organizations that assist low-income entrepreneurs to establish and expand their businesses. Recipients of SBA Prime Grants can then use the awarded funds to help business owners in their community. (You can find a list of recipient organizations here). Community micro-grants, generally facilitated through local nonprofits or Economic Development Corporations, can also be a resource for businesses, but they are not common in every community. For creative endeavors, Kickstarter.com is an online resource that can be used to attract funding.
You can get loans, and you can get help.
While it is unlikely that an individual will be able to find a grant to help start a business, there are other types of resources available. The local Small Business Development Center (SBDC, a service provided by the Small Business Administration) offers guidance on securing loans and alternative forms of funding, as well as other aspects of starting a business. Find your local SBDC here. The SBA website also offers a wealth of excellent material. Your state’s Department of Commerce and Economic Opportunity may also be a source of lending or other support for business startups.