Small Business Grants: Federal, State, and Eligibility Requirements

You are a budding entrepreneur, hoping to change the world through sustainable business practices. But you are facing several challenges. Your biggest hurdle is cash flow. You’ve heard about small business grants, but aren’t sure if you qualify. Follow along as FindLaw takes your through the various grants that may be available to you.

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Small Business Grants

Grants are sums of money, usually public (i.e. taxpayer), given to non-profit organizations, government entities or businesses to achieve certain goals considered socially and/or economically beneficial. For example, a childcare center wishing to expand services may apply for a grant to help it get started. Some non-governmental organizations and foundations also offer grants.

Grants are not easy to obtain, often require matching funds and must be used for specific purposes. Federal grants typically are not available to for-profit businesses, although some state and local grants are. Grants, unlike loans, do not have to be repaid as long as the applicable obligations are met.

The following types of grant programs may be available to small businesses:

• State programs to re-train workers displaced from declining industries, such as autoworkers in Michigan or loggers in Oregon;

• Programs to develop a depressed downtown area by attracting new businesses;

• State or county-wide program to become more energy-efficient;

• Federal programs to transfer military or space technology to commercial use (i.e. “memory foam” first used on the space shuttle).

Obligations of organizations as a condition of accepting grants may include the following:

• All project expenditures subject to government audit, at least annually;

• All grant funds must be spent (leftover funds must be returned);

• Must develop detailed goals, get approval, and carry them out exactly as described on grant application;

• Project phases must be completed on schedule.

Many states have Small Business Development Centers with details about grants and eligibility.

Federal Grants

Federal grants are not offered to for-profit entities wishing to start or expand a business. However, a wide variety of research grants are available to small businesses engaged in scientific research and development (R&D) under the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. To be eligible, small businesses must meet federal R&D objectives and show a high potential for commercialization should the project prove successful.

The U.S. Small Business Administration provides links to various federal agencies offering SBIR and STTR grants. Also, you can search for federal grant opportunities by category, agency or more specific criteria. If you find one or more grants that match your needs, you must go through a registration process before applying.

State Grants

Small businesses that are not directly involved in R&D activities may have more luck finding state or local grants than federal grants. In fact, some states offer grants for starting or expanding your small business or target minority or women-owned businesses.

Illinois, for example, offers grants related to coal, technology, tourism, small business job creation and other categories. The State of Texas also offers grants in various categories for small businesses. Contact your state government’s business development office for more details.

Hiring an Attorney

If you need help locating or applying for a small business loan, contact a business law attorney to assist you. A trained legal professional can help you through the red tape you are likely to encounter and help you apply for the grant which is right for your business.

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