Financing With Small Business Grants

In the never-ending search to raise capital, debt and equity options get most of the consideration. But small business grants provide another possibility.

A grant is when an entity, usually a government agency, provides funds for a specified purpose. (For example, Nebraska has a grant to help develop product prototypes.)

Why consider grants as an option? Because grants have advantages both debt and equity lack. Equity financing is dilutive; grants are not. Debt financing involves interest payments; grants do not.

Grants are sometimes described as “free money” because they do not require repayment. As a business owner, you know better. While grants don’t have a cash cost, obtaining one involves time and effort. Grant applications must be completed, including financial schedules and business plans. Grant recipients must track spending to ensure compliance with grant rules.

While there are federal grants and grants from businesses and non-profits, the most small business grants come from state governments. Each state has a commerce/business development agency and related web site, which is the best place to learn about the available programs. The US Economic Development Administration has a link to each state’s business resources. It’s worth browsing your state to see what programs might be available.

One thing to keep in mind is the calendar. Grant programs receive a set amount of funds for the fiscal year. If a program runs out of money, you will have to wait until the new fiscal year to apply again. Most state fiscal years run from July 1 to June 30. It pays to keep an eye on the calendar and apply early in the fiscal year.

For a more in-depth discussion of grants and links to more resources, check out the article from Bench.