Small businesses employ more than half of the people working in the U.S. today. Most of those small businesses are “non-employers” — meaning they have no employees. They are either individuals operating as sole proprietors, partnerships, or incorporated businesses. Technology is making it easier and easier for people to start a business, often working from home.
These businesses are responsible for creating well over half the new jobs that have been added to our economy over the past 18 years — and the percentage is growing as larger companies reduce their number of employees and new companies get created each day at an amazing rate.
So these are a pretty important part of the economy and the government should be all over it, right? You might think so. But consider: the government doesn’t just hand out money to anyone who thinks they have a good idea. Maybe they should do more of that, but the SBA (Small Business Administration) is pretty much as far as it goes. Don’t get us wrong, the SBA is a terrific resource, doing important things…but they are not giving out grants.
The bad news: there are no easy business grants out there just for the asking. The good news: there is plenty of help available – sources that weren’t even available just a short while ago.
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News March 2016: You can find business grants closer to home than you think. When you are looking for funding stay tuned in and alert to what is going on business-wise in your area. For example, Craven County, North Carolina recently announced a $60,000 grant that will let their Swiss Bear Downtown Development Corporation give small businesses help with mentors and marketing assistance. These services will be available to users of their Entrepreneur Center whether they rent space or pay a small fee for a membership.
News February 2016: Though federal government grants for small business are not plentiful they do exist. For current opportunities we searched grants.gov and discovered a relatively new funding announcement from the USDA's Rural Energy for America Program. This program offers grants as well as guaranteed loan financing to small businesses in what they define as rural areas. The financing is for purchases or installations of renewable energy systems or projects necessary to improve current energy efficiency. You can apply for loan guarantees throughout the year. Applications for grants are due by May 2, 2016. Grants are awarded for a minimum of $2500 and a maximum of $500,000. For details about applications and eligibility you can go to grants.gov and search for Funding Opportunity Number RDBCP-REAP-RS-EEI-2016.
News January 2016: Though the Small Business Administration does not award grants to businesses directly sometimes other government entities do. For example, at the moment the Department of Transportation Maritime Administration has announced a new funding opportunity (their term for a grant) for their Small Shipyard Grant Program. They will be awarding up to $4,900,000 with grants ranging from $250,000 to $1,000,000. These grants are targeted for small shipyards and can be used to make capital improvements, to improve their efficiency and competitiveness, the quality of their ship construction, repairs and more. They expect a high number of applications and the cut off date for applicants is February 16, 2016. You can learn more by going to grants.gov and simply entering “shipyard” in the keyword search box. And if you’re not a shipyard, you can still go to grants.gov and enter a more applicable keyword and see what you find. Sometimes there are indeed government grants for small business!
Update October 2016 And remember that the SBA does make it easier for banks to make loans by guaranteeing your business loan for participating banks. SBA loans are considered to be one of the best loans you can get for a small business. Rates are typically lower because the loans are guaranteed by a government agency, and lenders can also be a bit more flexible with terms overall. On the downside they can be tough to get — and as with most things related to the government, they can take a long time to come through. They are worth considering, just be ready for a fairly arduous process. And if you’re in a hurry and need fast turnaround, check out other options discussed below.
News October 2015: Never underestimate the power of the state — the one that you live in, that is. States are a great source of grants and loans. And they often focus funds on helping businesses get started and grow. The State Treasurer of California recently announced major financing assistance for a restaurant in Sacramento. About $150,000 was made availalble thanks to two state programs — the California Capital Access Program and the CaliforniaPollution Control Financing Authority. Whether you are in California or not, there’s an important lesson here about the assistance that is probably available to you and your business from your state. This is financing that you probably wouldn't otherwise be able to get — banks and others would find you too risky. But with state guarantees and assistance backing you up, it’s a whole new ball game. So take a look at your state web site and home in on business grants and loans.
News September 2015 More and more companies are entering the small business financing area in competition with banks. One should be of particular interest if you buy supplies on a regular basis. It's not a grant but it beats borrowing from a bank based on speed and ease of borrowing. A newly funded business called “Behalf” works with suppliers that sell products to owners of small businesses. Behalf pays them immediately on behalf of their clients – which makes the suppliers very happy. Their clients get their supplies right away and repay Behalf at a cost of $11 - $30 each month per $1000 that they borrow. Of course the $1000 must eventually be repaid as well but it's typically faster and easier than a bank loan. To apply you simply fill out a short questionnaire online.
News Flash August 2015 The legislation described below has passed! Great news for those whose applications have been on hold and for anyone looking for a loan for their new or existing business!
News Flash late July 2015 The Small Business Administration's program that guarantees bank loans for small businesses (the 7(a) Program) has hit its limit for this fiscal year. This is good news in that it means that there has been a lot of loaning activity going on (and lots of loans being approved!), which hasn't been the case in a while. But it's not great news if you want to get a loan under this program. Hang in there: the Senate has passed an increase in the maximum that can be loaned under the program to $23.5 billion (up from the $16.5 billion that has already been loaned!). That's definitely good news — if the House of Representatives will pass legislation to do the same. Applications are still being taken, so get in the queue so you are at the head of the line when the moneys are released. Great work SBA helping small businesses in this country!
Small Business Grants: A Warning: Below we list and give you a summary of the resources you should consider whether you are looking to start a business or trying to finance your company’s growth. But first, a warning: People want there to be government grants for business readily available. And because their desire is so strong they are too ready to believe what some will tell them: that there is are tons of money waiting for people just like you. And you just have to pay these folks a fee (a bit more for the extra special package) and they will streamline the whole process for you. Save your money. You don’t have to pay anyone to apply for a grant, and business grants for individuals or for very small companies basically do not exist. If you are a super-scientist in a very specific area then maybe … otherwise, no. So where do you look? Read on:
SBIC’s: We begin with SBIC’s because you may come across websites claiming that these are the folks with lots of money to grant that purposely stay under the radar so they won’t be deluged with requests. They may claim to help you find them and even match you with worthwhile opportunities. But know the facts: the SBIC (Small Business Investment Company program) is run by an office of the SBA (the Small Business Administration). The SBA does control a large amount of money from the government for specific funding organizations that meet very specific criteria. These organizations in turn invest in promising companies that meet their investment profile and project strong returns.
Sounds great, but know this: the companies SBIC’s invest in are typically mature companies who are not only making a profit, but they have substantial revenues (like over $10 million) and strong cash flows. This is probably not who you are! And If you are, the SBA will tell you when you go see them, which you should…..
The SBA (Small Business Administration): The SBA (other than the SBICs) is, hands down, the place to start when you are looking for financing for your business. You will hear again and again that they do not make loans directly to business. That is a fact! But they do offer so much other help, at no cost to you.
Great news is that over the past year the head of the SBA, Maria Contreras-Sweet, has moved this agency into the 21st century and is doing a lot to get more loan money flowing to small businesses. She came to the U.S. as an immigrant with few resources at the age of 5, and she knows the key role entrepreneurship and capitalism play in improving people's lives. She has co-founded a community bank in the past and has experience lending to small businesses —so she speaks your language and knows what you need. She has upgraded systems and simplified procedures so that you can find lenders fast and get the money you need fast as well. Don't ignore the SBA! Be sure to see how you can get the most from them in our review of the SBA.
The SBA also has volunteer retired executives who can help you with your plans and your options. They have local business centers all across the country with counselors who can assist you. And though they don’t make loans directly, they do subsidize the loans of some banks and they will help you to find them if you have a promising situation. They are there for everyone who wants and needs help getting a business off the ground – or growing one. A great place to start is our review of the Small Business Administration and tips for using them!
Private Companies: Yes, some businesses do want to help other businesses (especially since they could become customers!). There's no central database to learn about them, you just have to be keeping up with business news — and checking here to see what's new regarding money for small businesses. Right now Federal Express is accepting applications for awards that will total $75,000. The Grand Prize will be $25,000. Applying isn't difficult – fill out some information about your company and why you do what you do. An actual small business grant could be yours! Learn more in Small Business Financing Opportunities.
State and Local Governments: Many states, counties and cities have programs designed to help local businesses that show promise. Many of these are tech-oriented but not all. There are several ways to track them down: do simple internet searches with the name of your city, state or county along with words like “business grants” or “economic development” and see what comes up. Visit your local library and ask for help at the Reference Desk. Go to the web sites of your local government (state, city and county) and look for areas called grants, economic development or business incentives. These sites would also provide information about any specific qualification you have in terms of being part of a minority group or a veteran.
Credit Unions: If you are a member of a credit union it’s a good idea to check out their current loan rates. In many cases they will be lower than your bank’s and their requirements may be less stringent, especially if you are a member with an established relationship. They might also be able to refer you to other sources.
Personal Loans: If you just haven't had any luck with banks and you don't want to run up your credit cards, this might be the time to try a personal loan – one for which you don't need any collateral. You do have to have an ok credit score, which is reasonable. But they are pretty easy to get, and fairly quickly online. You do have to be careful to go with a reputable lender, and to be sure you'll be able to pay the loan off as agreed. Take a look at more details in our article about Personal Loans.
Grants.gov: Although this site provides a wealth of information about grants, it might not be for you. You could still do a search related to your area of expertise (like carpentry, heating and cooling systems, etc) and see if anything is happening in your area. You probably don’t qualify to apply but you could sign up so that you will be notified when that grant gets awarded and let the winner know you are an available contractor in the area. For more tips and information about grants.gov read our review. (You might also want to take a look at Grants.gov Is Not For You).
Micro-Lenders: This is a relatively recent trend growing in the United States and it’s quite exciting. If you are very small and perhaps you don’t even have a relationship with a bank or know where to turn, these folks could be just what you need. They often are looking for people just like you and provide not only loans but also training and assistance. Discover lots more in our articles on Microfinancing Opportunities and Microfinancing in the United States.
Manufacturing Extension Partnerships: This one obviously pertains to those with small manufacturing firms. Many states have these partnership programs which help manufacturers modernize their facilities or upgrade their processes to be more current, or even to develop their staffs. Some also provide grants for capital expenditures. Check your state’s website to find their program.
Crowdfunding: Another relatively recent trend – and another exciting one. This could be for companies of any size – including individuals – no matter how “different” your idea might be. Definitely take a look at our review of Crowdfunding News and catch up with this opportunity!
Foundaton Grants: These are a bit harder to find but can be rewarding. Many foundations and private corporations do make grants to businesses. For information about the fastest way to search all such grants available, see the “Other Grants” section of our article Types Of Grants And Where To Find Them.
Unusual Foundation Grants: There are lots of foundations out there but one in particular is quite interesting. It's called the Awesome Foundation and it has a network of “chapters” all over the country. Each month they award a $1000 grant for something they consider truly “awesome.” It doesn't have to be a business, but it can be. In fact it can be anything that you think is awesome and can convince them that it is too. You apply online and it's pretty straightforward. So if you have a great idea or you've come up with a clever way to do something give it a shot at awesomefoundation.org.
Most importantly, persevere! The often difficult task of finding money for your business is good training for the difficult – but potentially very rewarding – task of creating and running a profitable business.