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Finance & Accounting, Small Business Loans

Could Your Small-Business Financing Wish be Granted?

small business grants

Small business owners are often in pursuit of money to invest in their companies. The more obvious places to look might include traditional banks and alternative lending sources like Kabbage. But, is it possible for small businesses to secure capital through grants that do not have to be paid back? We’ve gathered a list of the different types of grants open to business owners – from a state and local level, to private grants.

Government Grants

The Small Business Administration , also known as The SBA, doesn’t provide grants to small business owners to begin or expand a venture. Government grants are only awarded to very specific businesses in very specific situations through bills passed by Congress and then signed by the President.

Ayman Salem, CEO of Materials Resources in Dayton, Ohio, has applied for and received several grants through the government’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. SBIR/STTR grants provide opportunities for small businesses and non-profit research organizations to receive money to fund research and development in scientific innovation. The guidelines for determining who is eligible and what kind of work qualifies are very strict.

Materials Resources has won these grants to build a very specific scientific prototype.

“Our products require a high cost to develop and commercialize,” says Ayman, of his company’s specialty niche in materials information – studying the atomic arrangements of the metallic alloys that are used in the auto, aerospace, nuclear, and oil and gas industries.

“Before a customer uses our service or buys our products, they want to see a working prototype that solves their material problem using our Microstructure Informatics Techniques,” Ayman says. ”Grants allow us to build such an MVP, and then we publish the results of the studies in international journals and conference presentations.”

Materials Resources fits into a specific category of technological innovation that makes the company grant-eligible. Ayman says these types of grants aren’t meant to bolster the profitability of a company.

“Calculating the ROI for writing a proposal should not be measured by the change of balance in the bank account,” Ayman says. “Rather, it should be measured by how much exposure the product is getting and how many new customers are willing to listen and become early adopters.”

If your small business fits into this niche of businesses that are eligible and reviewed for these type of government grants, this might be an option for you.

State and Local Grants

Sometimes state and local governments will offer grant money for specific industries doing specific kinds of work. In addition to the restrictions put into place regarding who can apply, many of these opportunities require the business owner to pair the grant with another source of funding, like a loan. You can check a list of all the grants available in your state on StateLocalGov.net.

Private Grants

There are some grants that are offered by private groups to small businesses. Lauren Foster, founder and CEO of Stretch Recipes, won a grant for her business from WomensNet, a private group that offers grants for women who own their own businesses and asks them to “pay it forward” in the future by assisting other female entrepreneurs. Lauren is now a finalist for an Amber Grant offered by WomensNet.

“I encourage businesses to apply but not to make grant funding the only source of income,” Lauren says. “While it’s free, most take time so do not rely on it solely. Focus on always getting a customer check so you can quickly validate and sustain your business.”

Some promising private grant options for small business owners include Leadership Grants, which offers grants up to $100,000; Georgia-Pacific Foundation offers small business grants to businesses located within 30 miles of a Georgia-Pacific plant; and Intuit often runs Love Our Local Business campaigns, giving away $5,000 grants to small businesses.

Do the Research

Grants are not plentiful, and if you find one that could be a fit for your small business, you will most likely be facing a lengthy application process.

“A business owner must face an honest assessment on whether he or she is truly qualified,” says Jaynine Howard, a business coach based in Jacksonville, North Carolina. Jaynine says business owners should then evaluate the time they will spend completing the application.

“Is there a better way to invest time to earn money?” Jaynine says that is a question a small-business owner should consider. That time versus cost issue should be revisited if the owner of the company is considering hiring someone to help with the application process. And Jaynine says a small business owner should also consider what the odds are that they could be awarded a grant. Whether the grant is won or not, the entire process can be a learning experience.

“If a business is not eminently qualified or the business is qualified but they decide it is not worth the investment to assume the risk, then I suggest they use the grant application as a tool to help identify areas of improvement in their business plan, marketing plan, and growth strategy,” Jaynine says.

On the surface grants may seem like a financing avenue worth pursuing since they are regarded as “free money.” But it is important to consider the qualifying criteria, the odds of winning, and the price tag on the time needed to complete the application.

“With very few exceptions, it is not worth the small business owner’s time to apply for grants,” says David Waring, editor of FitSmallBusiness, a site that reviews software and services for small businesses. “Federal and state governments do not provide grants for starting a business, paying off debt, or covering operational expenses. The exception is if your business is involved in research and development in an area that could provide a public good. Even then, however, these types of grants normally go to larger businesses,” David says.

And while loans and lines of credit are financing options that require repayment unlike grants, securing money through the alternative loan channel that Kabbage provides takes much less time and effort than writing and submitting a grant application, and you can get your money same-day. If you have questions about grants or loans, feel free to reach out to us at @KabbageInc on Twitter.

Do you have experience applying for grant money for your business? Tell us about the process in the comments section below.