Do you remember those late-night infomercials that talked about business grants? You know those: for the low, low price of $19.99, you could have access to millions of dollars in free grant money. Free cash is way too good to be true, right? Well, not exactly.
There are business grants out there that give small business owners and entrepreneurs use of capital. However, it isn’t as easy as pulling out your charge card and getting a magic list in your mailbox. It takes work to find grants that you qualify for, and even then, levels of competition are pretty stiff. That doesn’t mean you need to automatically write-off business grants, though. It just means that you need to understand what a grant is, what types are available, and how to discover the ones you qualify for.
In this informative article, we’re going to take an in-depth take a look at business grants. You’ll learn what they're and how to have them. And when you’re concerned about their effects on tax time, not to worry — we’ll cover that, too. Relax, relax, and get ready to learn more about grants.
What Are Small company Grants?
A business grant is an amount of money provided to a qualifying person or company for business purposes. With respect to the grant, recipients could receive a few $ 100 to thousands and thousands of dollars or even more.
Some grants are only able to be utilized in specific ways. Others are more flexible, allowing businesses to make use of funds to grow their company and enhance their likelihood of success.
Many different grantmakers issue small company grants. Included in this are local, state, and federal governments; private businesses; foundations; and corporations.
The application and qualifying criteria vary depending on the grant you’re pursuing. Some grants can be found only to minorities, female-owned businesses, or businesses in a few sectors. Others have requirements according to your company model (i.e., grants readily available for small businesses and sole proprietors that aren’t open to larger businesses).
Once you’ve determined you satisfy the qualifications, an application is required. Some grants may also require additional steps, for example creating a video regarding your business and its financial needs or doing an in-person interview.
One aspect to note here is that even though you meet all qualifications, grants are extremely competitive. Don’t automatically assume that it’s “within the bag.” There are thousands of other qualified business owners seeking to fuel their companies using grant funds.
Types Of Grants Available For Small Businesses
There are numerous grants open to various kinds of businesses. Let’s take a look at some of the most common.
- Federal Grants: Federal grants are grants which are issued by federal government agencies. These grants are typically awarded to businesses, universities, labs, nonprofits, along with other entities that provide services that help the public. Grants for small businesses may also be open to qualified businesses and organizations to help stimulate the economy.
- State & Municipality Grants: Local and state government entities have their own grant programs to provide financial assistance to local business owners.
- Small Business Grants For Women: Smaller businesses owned by women are often underserved when it comes to obtaining capital. For this reason some grantmakers issue grants solely to female-owned small businesses.
- Small Business Grants For Minorities: Another underserved group is minorities. Fortunately, there are a number of small business grants available exclusively for minority-owned businesses.
- Small Business Grants For Veterans: Business owners or aspiring entrepreneurs currently serving or which have served in the Military may be eligible for a small business grants directed at veterans.
- Startup Grants: Startup businesses in their earliest stages or that haven’t even launched yet could get the financial boost they require through startup grants.
Do You spend Back Grants?
Now, onto one of the greatest and many important questions: Do you have to pay back grants? The good news is that grants do not have to be paid back. So long as you entitled to the grant and are chosen like a recipient, grant funding is free of charge money for your business.
The not so good news, though, is this fact makes the grant process more competitive. After all, who doesn’t want to receive free money? That doesn’t mean grants are unattainable, but you should be aware that the process could be both lengthy and difficult.
The Pros & Cons Of Business Grants
Still undecided about researching and applying for business grants? There are many advantages to receiving a grant, making the time spent finding and applying for these grants worth the effort. However, there are several drawbacks that you should be familiar with before jumping in to the application process.
Pros
- Free money for your business
- Helps you gain visibility
- Can take your business to the next level
- Available to businesses that don’t meet traditional funding criteria
Cons
- Strict qualification requirements
- Extremely competitive
- Time-consuming
The Pros
Free Money For the Business
One of the most popular benefits that draw in businesses is that grants don't have to be repaid. Unlike loans along with other types of funding, you won’t have to worry about monthly obligations, interest rates, fees, and extra costs.
You also won’t need to bother about setting up collateral or giving away equity inside your business. Your grant is your money, which is completely free — you won't ever need to bother about repaying these funds.
Grants Help You Gain Visibility
If you receive a grant from a government entity or large corporation, this article be distributed to others via newsletters, company e-mail lists, and the grantmaker’s website.
Some grantmakers even take it one step further by spotlighting its grant winners over a period of time by posting articles and updates in your company’s progress and changes made with your grant money.
In these scenarios, your company receives instant exposure without any associated marketing costs.
Grants May take Your Business To The Next Level
The money you obtain from free grants will help you grow your business and go one stage further. For instance, you might be in a position to hire more employees, improve or expand your facilities, or purchase upgraded or additional equipment.
You might even have the ability to launch projects that help it will save you profit the near future while also helping the environment (for example, installing solar power panels in your building).
Grants May Be Open to Businesses That Don’t Meet Traditional Funding Criteria
For some businesses, grants can provide much-needed funding when it’s difficult to find elsewhere. Startup businesses with no revenue or operating history, business people with low credit scores, and businesses within certain industries might not be eligible for a loans, credit lines, or other kinds of funding. Businesses within underserved communities will also take advantage of getting a grant.
Though these businesses still have to meet requirements and be selected for the grant, receiving these free funds can provide the financial boost required to succeed — without relying on high-interest funding with unfavorable terms.
The Cons
Grants Have Strict Qualification Requirements
Qualifying for any grant can be challenging. Each grant includes different requirements, but it’s rare to find one which just any company can qualify to get. Some requirements can include:
- Women-, minority-, or veteran-owned businesses
- Businesses that meet a certain size requirement (e.g., under 500 employees)
- Revenue requirements
- Time running a business requirements
- Businesses in specific industries
There may also be requirements based on how funds could be spent. For example, a federal grant may be used to provide public services or improve a residential area. Other grants may be restricted to making your business greener, for example using solar energy or starting a recycling program in your organization.
Grants Are incredibly Competitive
It’s worth mentioning again that you will face competition when applying for a grant. Even though you check all the boxes, there’s a chance that the business may not be selected. Another business may have a more intriguing plan or perhaps be seen as using a greater requirement for funding than your business. Don’t lose heart, though — just move on and keep applying for grants and looking other sources of funding.
Applying For Grants Is Time-Consuming
The grant process from research through application can be quite time-consuming. First, you have to find grants which are a good fit for the business. Getting a suitable grant could take days or perhaps longer. Once you’ve found a grant that seems to be a great match, you need to consider the application requirements.
At a minimum, you’ll be required to provide personal information and info on your business. You may also be required to submit additional documentation or materials. This might include a video about your business and/or how funds is going to be spent, a project proposal, a business plan, and/or fiscal reports.
Once you’ve applied, there may be additional steps prior to the grant is awarded. These may incorporate a one-on-one interview, a job interview having a panel of executives, or giving a presentation.
In short, finding and tips on isn’t like getting a business loan, which can be completed in as little as a few minutes. Instead, be prepared to plan, make the work, and wait a potentially long time to receive funds — if, obviously, you’re selected.
How To locate & Get A Small company Grant
While the procedure for receiving a grant can be lengthy, there are some ways that you can shorten the procedure. One particular strategy is to go to the internet to analyze and find grants which are a suitable match for the business.
Simply searching “business grants” on the internet yields thousands of results, and lots of of them will end up being pretty worthless. Instead, start your research here:
- Small Business Association: The little Business Association (SBA) has a quantity of grant programs around to eligible businesses and institutions.
- Grants.gov: Grants.gov makes it easy to find and make an application for federal grants. There's also various resources, for example videos, blogs, and how-tos, that will help you in your search.
Once you’ve started your quest, make sure to consider the deadline for each grant. Make sure that the deadline hasn’t passed and that you have plenty of time to complete the applying. Next, review the requirements to make sure you meet these. Once you’ve verified that you simply meet all requirements, begin filling out the application and submitting additional information requested through the grantmaker. Take note of any important dates, for example when different rounds start and end, once the application period closes, and when winners will be selected.
Are Grants Taxable?
Free cash is great now, but how does it affect you later on? In other words, are grants taxable income?
Some grants aren’t included in your taxable income. For instance, college grants for people are not taxable, provided money is allocated to tuition expenses for that student’s chosen degree program.
Unfortunately, this doesn’t hold true for many business grants. More often than not, grant funds are counted as taxable income in your federal taxes. Which means that you will be necessary to pay taxes on these funds. The financial impact of the grant come tax season depends on multiple factors, as well as your business structure.
As a general guideline, you should expect that almost all grants are counted as taxable income. If you’re unsure of whether a grant is taxable, do your research. Read all conditions and terms, contact the grantmaker, or check out what the IRS says about taxable income. You can also talk to your accountant or tax professional to learn more about how grants affect your taxable income.
Tax Write-Offs
The good news, though, is perhaps you can have additional write-offs at tax season. Depending on how you spend your funds, you might add new tax deductions that help decrease your tax liability.
There are also some exceptions. Many grants especially for veterans are non-taxable. Government grant funds used for paying certain utilities or even the mortgage for your business may also be non-taxable.
Paying Taxes On Grants
If you’re awarded a grant, plan ahead before you dive into spending your funds. Talk to an economic professional, be ready to put aside funds if required for tax purposes, and intend to include taxable grants when filing your quarterly estimated taxes.
What About EIDL Advances?
Many businesses took benefit of the economical Injury Disaster Loan (EIDL) because of COVID-19. Some even got fast access to funding with the EIDL Advance.
Even though it is technically a grant, the EIDL Advance does not count as taxable income. You may also write off any qualifying expenses purchased with EIDL Advance funds. For instance, if you spent your advance on inventory, rent, and supplies, these expenses are deductible in your tax return.
There’s one further thing to note. Make sure to keep records showing the way your EIDL Advance funds were spent in the big event of the IRS audit.
Small Business Grant FAQs
Who is eligible for a small company grant?
Small business grant qualifications vary with respect to the grant. To qualify, your company may need to be in a particular industry, meet ownership requirements, make use of the money for a specific reason, or anything else. Make sure to thoroughly read the requirements from the grant before you apply to be sure you qualify.
How do i get free grants for my small company?
To get free grants for your small business, you have to find, apply for, and win grants. You'll find grants via avenues like small company groups on social media, grant directories, or engines like google.
Which documents have to obtain a business grant?
The documents required to apply for a business grant vary with respect to the grant. You may have to supply information like:
- Proof of identity
- Business plans
- Social media profiles
- Proposals about how exactly you will use the money
- Short or long essays about a particular topic
Are business grants readily available for nonprofits?
Yes! Grants are for sale to nonprofits. Generally, nonprofits have access to more grants than for-profit businesses.
Are grants considered taxable income?
Most business grants are thought taxable income, meaning you'll have to pay taxes. College grants will vary for the reason that they are not taxable income (provided the funds were spent as required). Consult with your tax professional regarding your specific circumstances.
Other Small company Lending Options Besides Grants
Let’s be truthful here: qualifying for a grant can typically be challenging. And let’s face the facts, there’s no guarantee that you’ll receive one, even if you devote hours to tips on. This doesn’t imply that you need to just bypass grants that are a good match. Who knows? You might be selected, and also the funds could totally change the face of the business.
Just comprehend the challenges before you. For instance, if you need funds immediately, a grant that won’t be awarded for months won't assist you to now. Fortunately, there are more small company funding choices to explore:
- Small Loans: A small business loan is a lump sum payment of cash that's repaid over a few months. This may be a couple weeks or many years. In addition to paying back what's owed, you’ll also repay interest to the lender. Small company loans are best for specific purchases, such as equipment, inventory, or supplies. SBA loans, in particular, are low-cost, long-term loan options for qualified business owners.
- Business Charge cards: A company credit card works just like your individual charge card. Business expenses could be charged up to your set borrowing limit and then repaid over time with interest. Business charge cards are ideal for emergencies and dealing capital. As you repay your balance, funds become open to use again.
- Business Credit lines: A line of credit is similar to credit cards. Rather than using a card for purchases, you may make cash withdrawals up to a set credit limit. Used money is repaid over time, along with interest. For those who have a revolving credit line, funds will be replenished as you reduce balance. A credit line is an excellent source of capital.
- Invoice Factoring: If you have unpaid invoices, consider invoice factoring. Your accounts receivables are ordered with a third party (or factor), providing you with the funds you’re owed, excluding the factor’s fee. This can be a way to access quick cash when your invoices haven’t been paid.
No matter which option you choose, make sure to seek information before diving in. Understand the price of borrowing, compare your options, and select the funding option that doesn’t just work for your business today but for the future as well.
In addition, you may also take a look at ’s other posts about grants, including grants for women, grants for minorities, and grants for veterans. Good luck!
