Grants can sound like a dream come true for small business financing. If you qualify, you receive free money to operate and expand your company, and you don’t have to pay it back. But before you rush off to figure out how to get a small business grant, be sure to consider the whole picture. A grant might not cover your most pressing needs especially with the immediate financial struggles many businesses are facing due to the coronavirus.
Grants typically come from the government, nonprofits or educational institutions. The federal government offers grants to encourage scientific research and development. Federal, state and local governments also offer grants to promote economic development, so businesses hire more workers. There are also grants to support underrepresented groups in the business community, like women, minorities and veteran business owners who could use extra resources.
How to Get a Small Business Grant during the Coronavirus (COVID-19) Pandemic
There are several SBA programs and loans in place to provide financial support for business owners struggling in the wake of the COVID-19 pandemic.
In particular, the Economic Injury Disaster Relief loan. By submitting your application for this loan, you have the option on the application form to request an emergency advance. Whether or not you qualify for the loan, this emergency advance is available for businesses impacted by COVID-19 for up to $10,000. This grant will not have to be repaid. Read more about the SBA Disaster Relief Advance to learn how this can benefit you.
The federal government also has a website, Grants.gov, where you can search for potential opportunities. With so much aid and support as a result of the COVID-19 pandemic, it’s important to also check with state and local government employment agencies to see whether they offer anything in your area.
The Small Business Association is another option. You can set up a meeting with one of their counselors, who can teach you how to apply for a small business grant. Finally, you can check with organizations that support your type of business. For example, women-owned businesses can apply for the Amber Grant or the Cartier Women’s Initiative Award.
Each grant has strict qualification rules, so not all will be the right fit. Make sure to read the fine print before applying.
Pros and Cons of Small Business Grants
The main benefit of taking out a grant is that you don’t have to pay the money back. That’s a nice financial advantage versus borrowing through a loan or taking on investors, where you need to give up part of your company. Grants are also a prestigious award, which means you could get press coverage if you qualify and boost your company’s reputation.
While these are all fantastic benefits, there are also some difficulties with applying for grants. With so many businesses struggling right now, as you can imagine, there’s a lot of competition for free money. Typically, fewer than 200 out of 2,700 grant applications are accepted, according to the Society for Nonprofits, which means your chances of qualifying could be less than 10%.
Even with an increase in the number of grants during the COVID-19 pandemic, to increase your chances of winning a grant, you’ll need to extensively research which grants you could potentially qualify for and fill out a long application. With the flood of applicants in need of financial support, you’ll also need to act fast to submit your application. And wait times might be weeks or months before you receive a decision. If you qualify for a grant, there could be strings attached, like you need to hire at least five new employees by the end of the year or you won’t receive the entire payment.
Small Business Loans vs. Grants
When applying for a grant, consider how soon you need financing. Learning how to apply for a small business grant can take a long time and there’s still a chance you won’t qualify. These factors make them a poor fit for covering your immediate needs to keep your business afloat when your cash flow dries up.
But combining grants with small business loans can be a useful strategy, especially those from alternative lenders that can payout in as little as 24 hours. You can use loans when you need money immediately while using grants for long-term needs, like re-opening your location or developing a new product or service. If you later qualify for a grant, you could then use that money to pay off your debt.
When you consider all the facts about grants, you can see that they are a good addition to small business loans but not a complete replacement. By using this information, you can decide whether a grant makes sense and if so, start planning how to get a small business grant.