Grants are money you don’t have to pay back. However, the application process is not without its challenges.
As a business owner wearing a million hats, you may wonder if this time-consuming effort is worth the reward. Before you start a business grant search, consider the following tips:
Find the right program
Business grants can be found from a variety of sources, including federal, state and local governments, as well as private businesses. There are also online resources like OpenGrants, Nav and others that can help you find grants for your business.
Finding the right program for your business will depend on your industry, size of company and location. For example, federal grants typically adhere to the Small Business Administration’s (SBA) definition of a small business. However, state and local programs may have more specific requirements.
Additionally, business grant applications can take a lot of time and effort. And, because of this, some business owners wonder if the effort is worth it. However, keep in mind that business grants are money you don’t have to pay back. Plus, winning a grant can give your business a competitive edge. In addition, the process of applying for a grant can also help you identify opportunities that might not have otherwise been visible.
Write a compelling application
Whether you’re applying to a government grant program or an alternative funding source, make sure your application tells a story that aligns with the goals of the specific fund. Many grants have a certain purpose, like helping businesses develop a product or service or serving the community. Likewise, they have a particular audience in mind.
Some grants are competitive, particularly those administered by the federal government. Others are less competitive, but still worth seeking out.
You’ll need to submit various details about your business for most applications, including a business plan, financial records, projections and a detailed statement on how you would put the funds to use. Consider seeking out a SCORE mentor or hiring a professional grant writer, as their expertise can help you stand out in the competition. Be aware that any money you receive from a grant is considered taxable income by the IRS. This can mean higher taxes for your business than if you were simply to use the funds to pay for an investment or expansion.
Make sure you’re eligible
Grants are great because they don’t need to be repaid. However, obtaining one can be a time-consuming endeavor as you work against thousands of other applicants. Also, grant money is considered income by the IRS and can impact your business taxes. Therefore, it is important that you work with an accountant to factor any grants you are awarded into your quarterly estimated payments and to determine how much of this income you will be liable to pay come tax season.
Some grants adhere to size standards in terms of revenue or number of employees, while others are reserved for specific entrepreneur demographics or businesses like eco-friendly sectors. It’s a good idea to check out the types of companies that have won the grant you are interested in so you can see whether your own company is a fit or not. Additionally, you want to avoid spending grant money on unrelated items so that you don’t run the risk of violating grant guidelines and facing potential fraud charges.
Don’t forget about taxes
If you’re going to go through the trouble of applying for a grant, don’t just skim the surface. Instead, dig into the details and find out what the decision-makers want to see. Show them your personality, and share your story. It’ll make them feel like they know you, and they’ll be more inclined to support your business.
In addition to government agencies, foundations, and charities, corporations may give small business grants as part of their corporate social responsibility programs. Search online for these kinds of grant programs and look for a fund that suits your industry.
Remember that grants don’t help you build business credit. Also, you’ll likely have to pay taxes on the grant money that you receive. To avoid a surprise tax bill, work out how much of the grant you’ll have to pay in advance and reserve this amount. Your funding organization should be able to tell you whether the grant is taxable or not.