Looking for “free cash ” from the authorities to begin your small business? Then you’ve because I’m here to let you know that – for the most part – there’s not any, come to the suitable area.
Well, government grants are financed by your tax dollars. Any grants, therefore, are tied closely to particular agency plans, for example, the Department of Energy or the Department of Agriculture and should be appropriated through The White House along with Congress. To further complicate issues, the government has very strict rules about who it provides grants to and what those funds may be used for.
That being said, particular businesses – especially those in high tech/ R&D areas – may qualify for government small business grants.
To explain more, HERE are responses to the most frequently asked questions about small business grants. I’ll additionally introduce other, more readily-available, government-backed financing options specifically designed for small businesses.
Am I able to get a government grant to start and grow my business?
Let’s dig a bit deeper into what government grants are readily available for company functions and what aren’t. Despite what you might hear on TV infomercials or on the internet, the authorities (national or state) doesn’t provide grants for the following actions:
- Starting a business
- Paying off debt
- Covering operational expenses
Nonetheless, as stated previously, there are exceptions. Grants are offered to special sectors and targeted causes such as scientific and medical research, conservation efforts, etc. This leads to our next question:
What if I’m involved in R&D? Can I get a grant?
Possibly. The federal government does provide grants to small business engaged in scientific research and development (R&D) under the Small Business Innovation Research (SBIR) Program. The program is overseen by the SBA (with participation from lots of agencies) and awards grants to stimulate high-tech innovations. In 2014, for example, SBIR awarded 300 grants with an average funding amount of $624,807. Eligibility for an SBIR grant is straightforward, but securing a grant takes time and effort.
Doesn’t the SBA offer small business financing?
While the SBA doesn’t give money to small businesses to in the form of grants, here’s the good news – it does administer loan programs that make it easier for small businesses to get the capital they need to start up and grow, export, recover from a disaster, and many other use cases.
With SBA loan programs, the SBA doesn’t supply the funds to begin or grow; instead, it provides banks and lenders for the money they lend to small businesses owners with a guarantee. This guarantee protects the lender’s interests by guaranteeing to pay a portion of the outstanding loan back when the loan is defaulted on by the business owner.
Read more about how it all works in SBA Loans Explained – A 101 for Small Business Owners. You can also get help finding the right loan for your business type and needs by checking out this Financing Wizard on Business.USA.gov.
The bottom line
In the event that you need capital, don’t squander your own time pursuing “ cash that is free.” It is likely that you won’t uncover it. Look at a tiny business loan or line of credit rather. Community banks and credit unions are specifically friendly to small business borrowers and can frequently offer lower interest rates than traditional banks.
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