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Business grants may seem like the holy grail for small-business owners, since they offer cash you don’t have to pay back.
But finding one can feel as futile as searching for lost treasure.
“Everybody wants to know: How do I get free money for my business?” says Jenn Steinfeld, director of entrepreneurship and economic development at the National League of Cities, an organization that supports local government officials nationwide. “And the answer that I have is: It’s just not that easy.”
That doesn’t mean small-business grants aren’t worth pursuing — as long as you manage your expectations. Here are five tips to remember as you search.
1. Prepare in advance
Grant competition application windows can be short. Prepare in advance so you’re ready to take advantage of good opportunities.
Salt Lake City-based Niche Snowboards has been in business since 2009, but the company leaders had never applied for a grant before they learned about the FedEx
FDX,
Small Business Grant Contest just four days before the application deadline. But they’d already invested time and resources in a strong mission statement and marketing assets like photos and videos — which helped them pull everything together in time.
“We had all the building blocks there,” says Ana Van Pelt, creative director at Niche Snowboards. “We just had to put them all together for this grant.”
The company won one of the contest’s three $50,000 grand prizes in 2022. It plans to use the grant to develop an upcycling program for manufacturing waste and to invest more in marketing.
When evaluating grant applications, FedEx’s judges look at a company’s website, social media profiles, sustainability efforts and whether it would make a good mentor to other small businesses, says Kelli Martin, who administers the company’s grant program.
“These are questions that you should have answered regardless,” Van Pelt says.
Also see: Four ways small businesses can prepare for a recession
2. Understand parameters and requirements
Local governments sometimes offer business grants as part of neighborhood revitalization or economic development programs. Facade grants and commercial corridor grants, for example, offer funding to help you update things like your storefront and signage.
You might encounter smaller applicant pools in your neighborhood than in national grant contests. But these may be matching grants, meaning you have to invest some money in the project yourself. They may also narrowly target certain streets or census tracts.
Local government business grants “have a lot of strings attached,” Steinfeld says. “There is a lot of data that [business owners] are going to have to give because that city is going to have to report back on how all that money was used.”
Related: Three alternatives to a small-business loan
3. Look in the right places
If a government grant doesn’t fund a goal that’s already in your business plan, it’s probably not a good fit.
But if one does, you need to make sure you know about it. Sign up for email newsletters, attend networking events and consider working with a local business mentor to find out when these opportunities are available.
“Identify your county website, identify your city website, meet with [the] economic development people of your community … or even attend community events or government events,” says Raj Tumber, a Las Vegas-based mentor with small-business coaching organization SCORE.
Connect with your local business development organizations, too. These organizations may host pitch contests, where business owners can try to sell investors on their ideas. Winners may receive grant funding or in-kind resources like business coaching and office space.
Business incubator programs are “the only place that I know of” that offer true startup business grants, Steinfeld says.
Check out: How entrepreneurs can raise money for a new business—and the advantages if you’re over 50
4. Watch out for scams
Beware of organizations that ask you to pay them and promise to submit your business to grant contests. They may be fraudulent.
“Anybody who is looking for a startup business grant has got to understand that there are a lot of grant scams,” Tumber says.
For a reputable information source, Tumber recommends Grants.gov, a website that lists available business grants from the federal government. You’ll also find advice about grant-writing and how to report suspected grant fraud.
5. Turn to other funding sources, too
Don’t rely solely on grant funding to move your business forward. If you’re lucky enough to get a grant, it can accelerate your growth — but it shouldn’t be the engine.
The leaders at Niche Snowboards, for instance, turned to friends, family and small-business loans for startup and expansion funding. They also use a business credit card to bridge gaps in cash flow.
Steinfeld recommends building a relationship with a local bank, too.
“They have a lot more flexibility with underwriting than you would believe … when they understand what you’re doing and are invested in you as a business owner,” she says.
Getting a business grant is exciting. But like so many parts of running a business, it’s far from easy. Niche Snowboards was one of just 10 winners out of nearly 18,000 applications.
“[Winning] actually brought us to tears,” Van Pelt says. “Because as most small-business owners know, funding — and just the nature of small business — is intense.”
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Rosalie Murphy writes for NerdWallet. Email: rmurphy@nerdwallet.com.
