Government grants may provide financing that can help you grow your business. Governments view grants as a way to stimulate the economy, create jobs, and promote businesses that pay taxes.
The good news is that, unlike a loan or other financing, a grant doesn't have to be paid back. The bad news is that government grants usually have stringent eligibility requirements and cumbersome application processes.
Grant requests are frequently rejected because the applicants don't follow directions, omit information, or misunderstand what information they are required to provide. If you do qualify and are awarded a grant, there may be additional administrative work to comply with strict reporting requirements.
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According to the Small Business Administration, government grants are usually provided to established businesses for an expansion effort that will generate tax revenues, make use of abandoned property, or create jobs. Despite what some shady Internet marketers claim, government grants are not provided to:
- Start a business
- Pay a business's operating expenses
- Retire personal or business debt
Types of Business Grants
While there are some federal grant programs available through Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs, these are focused primarily on research and development in the energy, technology, health, and life science sectors. For small businesses that don't fall within these categories, your best bet is to seek a grant for your business at the state or local level. Even these, however, are awarded for narrow and specific purposes, such as to:
- Purchase new equipment
- Upgrade facilities
- Train employees
- Expand into new markets
Examples of State-Administered Grants
Kentucky's State Trade Export Promotion Act (STEP), for example, is designed to promote the participation of small business in global trade by providing grants to attend international trade missions and export trade shows, as well as training workshops or other activities that facilitate export initiatives. Idaho also offers a STEP program and has so far awarded 89 grants to 68 businesses.
While the STEP grant programs are state-administered, funding is provided by the federal government. State and local authorities also fund their own initiatives.
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The Kentucky Department of Agriculture offers two grant programs to assist small farm wineries. One provides 50 percent reimbursement to small wineries for approved marketing projects, the other reimburses wholesalers $20 per case for distributed wine products of licensed small farm wineries. Grants are subsidized through a small farm wineries fund established by state legislation.
Some grant programs are competitions. New York's Industrial Growth Initiative awards grants based on a competition that funds the three best business plans for small business growth.
Additional grants are available through private and public sector partnerships. As an example, The New York Times reports that the New York Embroidery Studio received $67,000 in matching grants to offset the purchase of new equipment required to ramp up its capabilities to fulfill a contract with Ralph Lauren to help create team uniforms for U.S. athletes in the 2010 Olympics. The grant was made through a partnership between the private Council of Fashion Designers of America and the New York City Economic Development Council.
What Grants Does Your State Offer?
State grants are often not well publicized. To find grants available from the state where your business is located:
- Visit the state website and search for "small business grants"
- Call state government offices and ask for a list of agencies that give grants
- Email state agencies that either relate to small businesses or legislate funding related to your business and ask to be notified of any current and upcoming grant opportunities