Startups are inherently risky endeavors. According to Fortune Magazine, close to 60% of new startups fail. Because new businesses are so risky, it is notoriously difficult to obtain startup financing — most banks won’t lend to you unless you’ve been in business at least two years. While some online lenders offerÂ startup loans, startup grants are another option for new business financing. A startup grant is even harder to get than a startup loan, but grants are more desirable because you don’t have to pay the money back.
Want a shot at a startup grant? Follow these steps to find a business grant you might qualify for.
1. Determine Whether You’re Grant-Worthy
Generally, only certain types of businesses qualify for startup grants. If your biz doesn’t fall into one of these categories, it’s unlikely you’ll qualify. For example, while there may be grant money for an innovative hardware manufacturer, when it comes to a run-of-the-mill hardware store…eh, not so much. Then again, if you face the significant hurdles of having a female-owned hardware store opening up shop in anÂ economically distressed region, it’s a lot more likely that a private or public entity might want to give you some free money.
Read my post Do I Qualify For A Startup Grant?Â to determine if your business falls into one of the industries likely to qualify for startup grant funds. If not, you might want to start considering other alternative financing options, such as crowdfunding.
2. Start Local
City and township governments, business associations, and nonprofits in your immediate region are good places to start looking for grants. Even if you determine that your business doesn’t fit into one of the “grant-worthy” categories I mentioned above, you might be eligible for a grant if you’re starting a business in a certain city or region. For example, the Arch Grants organization awards grants to new businesses in the St. Louis area. There are not too many of these sorts of grants, but it’s always worth checking.
Be sure to scan city, county, and state websites for grant opportunities, as well as your local Chamber of Commerce. If you’re willing to relocate, you can also check local business grant opportunities in the city or cities you’d consider moving to.
3. Search Your Niche
If you can’t find any grant opportunities for businesses in your area, you can search grants by niche; that is, by your particular industry or business type. Your startup may fall into multiple niches — for example, your business may be veteran-owned and also a clean-energy business. Simply searching a phrase like “business grants for green construction” or “grants for home daycare” may deliver results tailored to your specific business niche.
Sometimes grants are for a particular niche and also a particular region. A couple examples of niche business grants include the Halstead Grant for new silver jewelry designers living anywhere in the US, and the Green Technology Business Grant ProgramÂ for green technology startups in Cleveland, Ohio.
4. Go Corporate
Several large corporations offer business grants or host some kind of small business contest where the best businesses can win free money. These grant programs are highly publicized and thus highly competitive, but they might be worth looking into. FedEx, Miller Lite, and Visa are a few corporations that award business grants; Miller Lite’s grant contest is especially aimed at startups.
Even some popular business lenders offer business grant contests.Â Veteran-owned businesses, for example, should look into StreetShares‘ annual business contest for veterans.
5. Look At A Federal Level
Small businesses can potentially find grants they are eligible for on Grants.gov, the one-stop-shop for government grants. However, you should know that the vast majority of these are medical research grants. Also, even if you’re eligible for one of these prized federal grants, you’ll likely be competing with nonprofit organizations, and even city and state governments. The reason I listed federal grants last is that there are few, if any, federal grants a typical startup business would be eligible for.
However, at least a couple federal grants are aimed at innovative small businesses, and these are Small Business Innovation Research (SBIR) grants for high-tech businesses involved inÂ scientific research & development. The InnovateHER grant contestÂ is for businesses that benefit women and children.
This blog post on the SBA website explains a little more about US government grants and how most are not really aimed at for-profit businesses. If you want some government help in funding your small business, you might want to look into a Small Business Administration (SBA) loan. These loans are low-interest and relatively easy to apply for if you use an online SBA lender like SmartBiz.
Once you find a list of startup grants you’re eligible for, the next step is to start preparing your grant application package. The application process is slightly different for each type of grant, but usually you will have to submit a business plan and Request for Proposal (RFP). For a large grant, you might even consider hiring a professional grant writer, though this probably wouldn’t be feasible or necessary for a grant contest where you only stand to win $2,000-$5,000, even after beating out thousands of other applicants.
The last thing I’d recommend to anyone searching for startup grants is to review startup grant alternatives, such asÂ small business loansÂ or alternative business financing options like P2P loans or equipment financing. If you have any questions about startup loans or alternative business financing, feel free to email us or ask in the comments!
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