Funds are integral to any business; you cannot set up or even run a business without finances. This is why there are several funding options for businesses. One highly sought-after option among these many options is business grants. So, it isn’t surprising that you want to know “what is a grant in business”.
As a business owner, you most likely know what business grants are.
But you may need more insight into the topic.
Whether you are new to the concept of business grants or already have an idea, this article will help you better understand.
This article will clearly explain the meaning of grants in business and several other things you should know about the topic.
In other sections, you learn the different types of grants and how to apply for one.
That’s not all. You will also learn the pros and cons of this business financing option.
To get this knowledge read this article to the end.
Meaning of Grants in Business – What is a Grant in Business
The general meaning of the word grant from the dictionary is when a person requests something, and the other party gives them what they asked for.
This is the same concept of grants in the business world.
A business grant is an amount of money a body gives to a company (after they request it) to help the company further its business processes.
Governments, foundations, and trusts are some types of organizations that offer grants to businesses.
Grants are a financing option that a lot of businesses clamour for.
The reason is that the business that gets the grant does not need to pay it back.
They also do not have to exchange equity for the grant.
Unlike grants, other financing options demand that the company pay back the money with interest or give up an equity percentage for the money.
However, many small businesses cannot get these grants because of how highly sought-after they are.
Aside from the fact that many businesses seek to get grants, grants come with specific requirements and criteria.
Sadly, not a lot of businesses can meet up with these requirements.
This is why most companies do not consider grants to be a feasible financing option.
But this does not mean companies do not apply for and get grants.
It simply means if you are considering this financing option, you have to work for it.
Luckily, this article is here to help with all that.
Types of Grants – What is a Grant in Business
The truth about grants is that it will be easier to get one if you fit the purpose of the grant.
This is why you need to know the different types of grants available.
Different types of grants are available to businesses, each for different types of businesses and serving specific purposes.
When you know the different types of grants, you can easily streamline them and decide on the type that will suit your business.
From there, it would be easier to look for business grants peculiar to your business.
With that said, here are the 6 common types of grants available to businesses.
There are federal, state, and local governments; therefore, government grants are also given by these different tiers of government.
Federal grants are the most sought-after among this three because federal grants offer more money than the others.
For this reason, grants from this tier have rigorous requirements and are often quite specific.
There is often a clear specification of what the government expects the funds to be used for.
State grants do not offer as much money as federal grants.
However, their competition level is often based on the state.
Some states have a higher competition level for grants than other states.
Local grants are a lot smaller than the other options, but you may have an easier time obtaining a local grant since the competition won’t be as fierce.
Local grants are mostly channelled toward improving the locality.
So, businesses helping the local community get better do receive local grants.
Another thing you should know about government grants is that some of them are very specific.
These specific grants cater to specific industries or niches or for very specific purposes.
For example, there is the Small Business Innovation Research grant.
This grant explicitly targets businesses conducting research and development and has commercialization potential.
This is why if you are looking for a government grant, you must properly research to find a grant that matches your business.
This way, you will have a better chance of getting the grant.
The Small Business Association handles most government small business grants.
This tells why people refer to most government grants as SBA grants.
Another common type of grant is a corporate grant.
Corporations offer these to small businesses.
Corporations often offer these grants as a form of their contribution to society- giving back to society.
A good example of corporate grants is the grants Coca-Cola Foundation awards to small businesses working to develop their communities.
Non-profit organizations offer these grants to small businesses with certain features that match the goals and mission of the foundations.
Grants for Minorities and Immigrants
As the name implies, these grants are specifically for immigrants and minority groups.
There aren’t many of these grants, but you may find some if you research.
The government, cooperations, and foundations can offer them.
For instance, the federal government agency Minority Business Development Agency is especially for women and other minority business owners.
This agency is there to help these groups grow their business and offers grants from time to time.
Grants for Women – What is a Grant in Business
There are a lot of women who are now business owners.
With each day, more and more women entrepreneurs enter the business scene.
Sadly, while this is a welcomed development, many of these women do not get the funding they need.
Due to this, a lot of women entrepreneurs have to look for alternative funding sources.
This is perhaps one of the reasons women’s business grants are a common subtopic when discussing grants.
Grants for women are grants specifically designed for women.
Streamlining the option this way will most likely give you a better shot at getting the grant.
Also, if you have a hard time getting the grant, consider other women-only financing options like women-only accelerators and incubators.
Grants for Veterans
If you are a veteran and need business funding, you should consider getting a veteran grant.
The government offers these grants from time to time, and it may be easier to get one since the options have been significantly streamlined.
However, because these grants are periodic, you have to be on the lookout to ensure you know about them whenever it is on the table.
For instance, the government offers vet-only loan programs.
So, if grants don’t work out for you, you can consider other objects to help you kickstart or scale your business.
Advantages and Disadvantages of Business Grants – What is a Grant in Business
Business grants are great, but they are not all great,
Like most things in life and business, they have their benefits and downsides.
Before applying for a business grant, you should know these benefits and downsides.
This way, you’ll be able to make an informed decision about getting a business grant.
Therefore, here are some of the common pros and cons of business grants.
Advantages of Business Grants
The following are the major benefits of business grants:
You Do Not Have to Pay Back
One of the best things about grants is you do not have to pay them back.
They are free funds, so you do not have to give anything in exchange for them.
As far as you are qualified for the grant, you will be given the money to invest in your business.
This is why this financing option is very appealing to business owners as opposed to other options.
It helps You Gain Credibility and Visibility
Another major advantage of getting a grant is that it would also increase your business visibility and credibility.
This is especially true if the grant is a much sought-after one.
A lot of people would know about the grant, and getting the grant will put your business in front of the public.
You would also gain credibility since it would mean your business is doing something right that’s why you got the grant.
One Successful Grant Opens You Up to More Grants – What is a Grant in Business
One good thing about getting a grant is its impact on your business.
Your business will be considered more credible after getting funding.
Other grant bodies will be more inclined to award their grants to you.
So, getting one grant will help you get more grants.
Grant Information is Easily Accessible – What is a Grant in Business
One thing that you have to do to get a suitable grant for your business is a truckload of research.
Imagine how difficult this would have been if you did not have the information you needed for your research.
Luckily, you do not have to imagine this as grant information is as available as it is accessible.
Getting information about the different types of grants available to businesses is very easy.
A simple Google search will help you learn how, where, and when to apply for a grant.
Disadvantages of Business Grants
The following are some significant drawbacks of business grants:
Applying for a Grant can be Time-Consuming
The whole process of applying for a grant can be quite tedious and time-consuming.
You have to spend several hours researching to find the best grants for your business.
It does not stop at that; after finding the perfect grant, you still need to apply.
This would likely involve paperwork.
You’d need to make your proposal, which must be convincing enough to help you get the grant.
Competition is Fierce
Grants are a very beneficial financing source when compared with other options.
Therefore, a lot of businesses are constantly vying to get one.
This makes the whole process very competitive.
With several other businesses trying to get the free money you also want, your chances of getting it may not be that high.
Strict Requirements – What is a Grant in Business
Grants, especially government grants, often have strict requirements.
You may find a suitable grant for your business, but you may not be eligible for it.
And even if you are, you may not have all the requirements needed to apply for it.
Many Conditions Attached to the Grant – What is a Grant in Business
Yes, a grant is free, but this does not mean you can use the money to do whatever you want.
A lot of grants often come with certain conditions and restrictions attached to them.
The body awarding the grant may specifically describe how you are to use the grant funds.
This can be very frustrating, especially if you have a more pressing need for the fund.
Tips on How to Apply for Grants – What is a Grant in Business
The thing about grants is that they usually have strict requirements; this is especially true of government grants.
They are also quite competitive.
So, even if you are to meet the requirements, there is no guarantee that you will get the grant.
This, however, does not mean you cannot try to get a grant.
If you do everything the way you should, you may get the grant despite the odds.
Therefore, it is worth giving it a shot.
If you want help doing things right, then all you have to do is follow these tips below.
Research – What is a Grant in Business
The first thing you need to do is research.
There are so many types of grants available to businesses, and the type of business you run determines the grant you apply for.
Even you, the business owner, can influence the grant you apply for.
For instance, if you are a veteran or woman, you can apply for a grant specifically meant for you.
Do your research and streamline your options accordingly.
Once you find a grant matching your company’s needs, you can carry out the following tips.
Speak to the Organization Offering the Grant – What is a Grant in Business
You have to determine whether you are eligible for the grant you want to apply for.
You can do this by checking the grant body’s website and learning more about the grant.
Or better yet, contact the organization offering the grant and ask them about the eligibility and application process.
Applying for a grant you do not qualify for would be a total waste of time.
Ensure You Have a Business Plan – What is a Grant in Business
The body offering the grant cannot just fund your business without knowing about your business.
They would like to know how feasible your business is and the current standing of your business.
For this reason, you would need a business plan.
Your business plan should be in-depth and professional.
If, at this point, you are yet to get a business plan, then getting one is a great idea.
You could hire a professional to do this if need be, or you could develop a business plan yourself.
If your business is already operational, then the grant body may be interested in your company’s current position.
For this, you may have to provide your balance sheet.
Learn the Objectives and Purpose of the Grant
Grants often have specific objectives and purposes.
You have to find out what these are and focus on them as you write your application.
In your application, refer to the goals and how you intend to achieve them if given the grant.
This will increase your chances of getting the funding.
Be Sure of Your Funding
Sometimes, the government gives grants that match how much you have in your business or how much you can invest.
So, you have enough funding equivalent to the grant amount you are hoping to get.
Apply as soon as you can.
Grant applications often have a window.
If you delay applying, the application may close before you can apply.
Early application may also give you an advantage over those that would apply late.
Track the Application
Your work is not done after you submit your application.
If you are given a tracking number, you have to track it to know the status of your application.
This way, you can be informed about your application progress.
Conclusion on What is a Grant in Business
A grant is a sum of money that a body like a cooperation, foundation, or governmental agency award to businesses to help them grow.
Grants are very much sought-after because they are more like free money.
You do not have to give anything in exchange for a grant.
Because it is free money, everyone wants it, so competition is fierce, and getting a grant is quite difficult.
However, this should not stop you from trying.
And if you apply for grants and aren’t able to get one, you should consider other financing options like incubators, accelerators, loans, angel investors, and venture capital.