Grants are available for a number of business activities or projects and cover many business sectors. Grant funding is intended to support and develop enterprise in the hope that it will also provide a boost to employment and the local economy. A variety of organizations and Government departments offer grants and as a small business, you may be eligible to access some of these.
Business support in the form of grants to help you start a business or develop specific projects can provide much-needed finance and sometimes expertise to help your business grow.
A grant is financial assistance, usually to start a business or for a specific project, which is given to your business by an awarding body. Grants provide finance to allow your business to undertake a specific project that, without financial assistance, would not be able to proceed. Such a project might involve the initial start up of the business, developing a new product or buying equipment.
A grant is usually a one-off payment and provides funding that covers a percentage of the costs of the project - normally, you or your business will have to meet some of the costs too. Unlike a loan, a grant does not usually have to be repaid, unless you fail to adhere to the specific terms and conditions of the scheme.
What Can You Get A Grant For?
Grants are available for a variety of projects, but each individual scheme will offer funding for a specific purpose. Whether you qualify for a grant can also depend on factors such as the type of business you run, the size of your business, whether the project will create jobs and where your business is located.
Grants may be available to cover one or more of the following activities:
- Advertising, marketing and promotion.
- Business expansion and relocation.
- Business start up and market testing.
- Investment in capital equipment.
- Co-operatives and community enterprises.
- Product design.
- Environmental improvements.
- Improving business premises.
- Information technology (IT) and e-commerce.
- New technology and innovation.
- Recruitment and training.
- Research and development (R&D).
It is worth noting that grants cannot usually be used for working capital or simply the organic growth of your business.
Most grants have strict eligibility criteria or specific exclusions, for example for certain locations or industry sectors. Although individual schemes vary, there are some common themes across most grants.
Some areas have their own grants or specific schemes targeting social deprivation or high unemployment. Other grants are only available to businesses of a certain size, measured by turnover or the number of employees.
Certain sectors, including shipbuilding, coal and steel, agriculture and transport, are subject to special restrictions. Manufacturing businesses are more likely than others to qualify for grant support, while retail businesses are least likely to qualify.
Most grants are not available retrospectively. For instance, if you are planning to start a new business you should apply for any appropriate grants well in advance of the date you intend to start trading. You will not usually be eligible for this kind of funding if you have already started to trade, and if you have already purchased the equipment you are seeking a grant for it is unlikely that the application will be considered.
Raising Startup Capital
Who Offers Grants?
Many publicly funded groups provide financial assistance to businesses. The awarding bodies for grants may be by worldwide, continental, national or local organisations.
How do you apply for a grant?
The grant application process will differ from scheme to scheme. However, these are some of the general stages that will apply to most situations.
- To find out what grant funding is available in your area and for your particular project, one of the best places to start is your local SBA or Business Link. Most will have a directory of assistance available locally, nationally and at a continental level. Advisers will be able to put you in touch with the relevant grant awarding bodies and will be able to help you through the application process.
- Contact the awarding body and check your project meets the specified eligibility criteria of the scheme to find out whether it is actually worth applying. Grant application forms can be lengthy and may take a lot of time and effort to complete. It is important to find out whether it is worth pursuing the application in the first place before you proceed. Ask the awarding body to send you an application form and more detailed information about the grant.
- Remember you will be required to prove that your business has a genuine need for grant assistance.
Most schemes will require you to supply a project plan or proposal, or frequently a business plan providing:
- A project description detailing the aim of the project and how it will benefit your business.
- Who will run the project, and what experience, knowledge and skills they have.
- The total cost of the project, and how much money is required.
- The length of the project and key deadlines.
- The location of the project.
- Why the project needs grant funding and what would happen if the support wasn't provided.
- How you intend to fund your share of the project's costs.
- How the project complies with the criteria set by the grant provider.
- Details about your business, when it was set up, its activities and so on.
Financial information about your business. This might require the submission of accounts and forecasts.
When making the application:
- Read any guidance notes that are supplied with the application forms. These will give you information on how to complete the form and could save you a lot of time and effort in the long run.
- Application forms will differ widely. You should follow the format required, be clear and concise, and include all the information relevant to the grant you are applying for.
- For national and European grants, you may have to submit two forms. A short initial form will be used to assess your eligibility for the grant and a second form will be much longer, providing detailed information about your business and the project you intend to undertake.
- Speak to someone involved with administering the grant who can help you with completing the form. Alternatively, seek the assistance of your business adviser or accountant to help you with your application.
- Your business plan should provide a lot of the detail for your grant application. You should make sure your business plan is up to date, and includes information about your experience, future plans and financial requirements.
- When you have completed the application, make sure you check it over and ensure you have supplied all the information required. If your application is incomplete it will take longer to process and is more likely to be rejected. Also, if you provide incorrect information the grant may be reclaimed.
What happens after the application has been submitted?
You will probably have to wait some time before getting a decision on your grant application, ranging from a few weeks for local grants to a year for national or European grants. This is something you should consider when applying for grant funding. If you need immediate funding for your project, this is probably not going to be the best option for you.
- Always contact the grant provider before pursuing an application.
- Check for specific eligibility criteria and exclusions.
- Make sure you can prove you have a genuine need for a grant - and that without the grant the project would be unable to proceed.
- You will usually be required to meet some of the costs of the project (usually at least 50%), so ensure you are able to provide the extra finance.
- Make sure you have a detailed business and project plan.
- Wait until you have received written confirmation that your application for a grant has been successful before you start committing finance to a project.
- If your grant application is declined, ask for feedback about why it failed. This should provide you with ideas on how to structure future applications.
- Apply as soon as possible. The chances of a successful application are always highest just after a new scheme is launched.
- Write your application proposal to match the awarding body's objectives. Many awarding bodies prefer to see specific targets and results that are compatible with their own objectives. Make sure you mention any benefits your project will bring, for example to your local community, the economy or the environment.
Too many businesses put all their efforts into chasing grant aid, neglecting their core business purpose in the process, but this is a mistake. The first step is to decide what your business needs, then look at what this might cost to implement. Finally, explore whether grant aid might contribute towards the cost. Talk to your business adviser and other businesses in your sector for more advice.
Grant And Loan Resources
If you are in need of funding for your business venture, there are many options available to you.
While there currently are no grant programs to start a small business, there is grant support in the way of research and educational assistance. Despite the hype that you can get "free money to start your business", grant monies are bound by very specific terms and timelines. I have searched every grant website and resource available, and even the SBA does not provide outright grants to individuals to start or expand a small business. But there are many financial assistance programs you can use.
The Small Business Administration offers numerous loan programs to assist business startup and entrepeneurs. While these programs are available through the SBA, the SBA itself typically doesn't provide the funds - they are a "guarantor" of the loans made by financial institutions; most programs are on guaranty basis.
The SBA Micro-Loan Program
The SBA's Micro-Loan program offers smaller loans to start-up, newly established, or growing small businesses. These funds are made available to community non-profits, called Intermediaries, which in turn provide the funds to eligible applicants. The maximum amount you can borrow is $35,000, and the average loan size according to the SBA is $10,500.
So if you have, say, everything in place for your business but lack an advertising budget, or you need equipment and have exhausted all other funding sources, the Micro-Loan program may help you get the smaller loan you need.
As with any loan, each Intermediary will have their own lending and credit requirements, and sometimes collateral and/or a personal guarantee by the business owner is required. Interest rates and fees also vary by Intermediary and area. The maximum term for a Micro-Loan is six years.
Intermediary's job to assist the borrower with business training and technical assistance. Some applicants may need to participate in such training before an application can be considered.
An initial injection of money could enable you to fund R&D, conduct market research, test the market with a prototype, get legal advice or develop marketing materials.
- Talk to your local enterprise agency, local council economic development officer and Business Link to see if there are any grants available in your specific area.
- Work out exactly what you need the money for – grants won’t be provided for general running costs, they will support a specific outcome – eg premises, training, trademarking etc.
- Grants are often tied to rigid selection criteria – age, gender, ethnicity, unemployment or have a specific remit such as R&D or innovation. If your idea doesn’t fit – don’t try to force it.
- Make personal contact by phone or ideally face to face with the grants officer – don’t just send in your application cold. Talk through your proposition with them to check whether your idea is suitable and it is worth applying.
- Prepare a business plan to accompany the application form – but make sure it stands out from the crowd. Most importantly you will need to present a compelling vision, a passionate commitment, clear benefits and robust cash flow forecasts.
- Be aware that grants are often allocated on a cyclical basis. Research upcoming deadlines and be prepared to wait several months for a decision – don’t expect a quick answer.
- For larger funds, one grant will not usually fund 100% of proposed costs – so you will have to find match funding from another source.
- Ask yourself honestly – could this business get off the ground without a grant. Look at alternative sources of finance, such as loans, 0% credit cards, credit unions, friends and family. Funders will want to make sure that there is no chance of you moving ahead without their support.
- Don’t take your eye off the ball. It’s easy to get distracted by the lure of grant money – and this can become the focus of your energy rather than building your business.
- Become a Bootstrapper - many people convince themselves that the only way to start a business is to raise large sums of money without realising there are other, less conventional routes. Bootstrapping means finding creative ways to support your start-up business until it turns profitable. This method may include negotiating delayed payment to suppliers and advances from potential partners and customers. The key is to start small, start selling and start generating your own cash to fund your business growth.
A grant is a form of assistance, usually financial in nature, the benefit of which is that it is non-repayable. Grants can be distinguished from other forms of finance available to individuals or organisations by the fact that the grantor’s decision to support an organisation is made without the need for direct commercial gain.
One often reads about hundreds of millions of dollars of grant money available - all but for the asking. While large sums of money may be available the notion that it is available to you, your business or your charity by simply asking for some help is wildly inaccurate. Grants, where available, are available for a reason. At the outset, it should be remembered that grants are designed to help specific people/organisations, with defined projects in specific circumstances for specific purposes. They are rarely going to meet even fifty per cent of project costs, meaning you have to find other funds, usually from your own savings or your company reserves. To win at obtaining grants you must be eligible to do so.
It should be remembered though, you do not have to pay a grant back, ad using the same plan to obtain bank funding alongside grant funding is a legitimate way of both starting your business, growing your business and getting some real local support.
Before you start thinking about grants you need to be clear what the grant will be used for. You do not get grants simply because you start a business. Most schemes are ‘discretionary’ in that your success or otherwise in getting a grant is dependant upon decisions made by the purse-holders of the grant scheme.
Grants are given for a reason and that reason, quite understandably, has to be a good one. One of the best is that the grant will enable you to proceed with a new or better project. In most grant schemes in most areas you are required to prove that you need the grant. That means you will be required provide a Business Plan that shows what your business ideas are, what your intended market is, how you will reach your customers, what income will be generated and so on.
You may also have to demonstrate that you have tried to source funding from other providers but can’t for specific reasons i.e. lack of security. Terminology can also be important, a cleaning company is unlikely to get a grant, a company that is a specialist cleaner of limpets and barnacles from ocean liners could be successful.
Often grants are directed at particular type of project. One seeking to help with urban regeneration is unlikely to be of use for a medical research project.
Location is also vital. Grant support available in a mining area would not be available at a seaside resort or even in a neighbouring borough. Remember that regeneration can take place anywhere are the re-utilisation of a derelict site sits comfortably with most grant funding bodies.
It should also be noted that if you are to seek funds to employ people, again a legitimate area, it is unlikely that you will get funding to meet the costs of high-cost staff. Creating a business in a derelict site, which is well-planned and systematic and can use low-cost staff is a real opportunity to get grant funding.
Some business activities are generally excluded from grant funding - particularly those that might be described as ‘displacement’ activities - i.e. those activities that would simply divert income from one business to another. A simple example of this would be retail activity where the new business would divert custom from another local business.
Always check that you eligible for a grant before you start a project. Grants are rarely awarded retrospectively. If you have started a project you are likely to be deemed sensible enough to have done so because all the money you need was sourced at the outset.
Always treat grants as a useful bonus that will help you with your project, not as a crutch upon which your project may stand or fall.
There are many groups of organizations that are eligible to apply for government grants. Typically, most grantee organizations fall into the categories below.
- State Governments
- Local Governments
- City or Township Governments
- Special District Governments
- Native American Tribal Governments (federally recognized)
- Native American Tribal Governments (other than federally recognized)
- Independent School Districts
- Public and State Controlled Institutions of Higher Education
- Private Institutions of Higher Education
Public Housing Organizations
- Public Housing Authorities
- Indian Housing Authorities
- Nonprofits having a 501(c)(3) status with the IRS, other than institutions of higher education
- Nonprofits that do not have a 501(c)(3) status with the IRS, other than institutions of higher education
For-Profit Organizations (other than small businesses)
Small business loans and small business grants may be awarded to companies that meet the size standards that the U.S. Small Business Administration (SBA) has established for most industries in the economy. The most common size standards are as follows:
- 500 employees for most manufacturing and mining industries
- 100 employees for all wholesale trade industries
- $6 million for most retail and service industries
- $28.5 million for most general & heavy construction industries
- $12 million for all special trade contractors
- $0.75 million for most agricultural industries
Many grantmakers permit grant applications by invitation only, and require potential grant recipients to submit preliminary proposals in the form of inquiry letters in order to be invited to submit a Full Proposal.
Inquiry letters are designed to convince the grantmaker to consider your request. They provide you the opportunity to give the grantmaker a snapshot of your proposed project/program. Be sure to establish a connection between your proposal's goals and the grantmaker's priorities, and focus on detail, clarity, and conciseness, while conveying the impact your proposal will make on the need or problem you are addressing.
Your Inquiry Letter should condense all of the key information into the following main elements:
- Organization Overview / Purpose
- State Reason for and Amount of Funding Request
- Describe Needs or Problem (including target population, statistics, examples)
- Describe Project or Program
- List other Project Funders (prospective and committed)
- Request Funding Application
Typical inquiry letters, usually a maximum of 2-3 pages, include the following components:
COVERSHEET: Organization Name, Address, City, State:, Zip Code, Country, Contact Name, Title, Telephone, Fax, E-mail Address
- The mission of your organization (one paragraph)
- The purpose of your request (one paragraph)
- How your request fits the grantmaker's funding priorities (one sentence)
- Total annual general operating budget
- Fiscal Year
- Total proposed project/program budget (if other than general support)
- Grant amount being requested
- Matching funds committed from other funding sources
- Proposed grant project/program time frame (beginning and ending dates)
- Tax exempt status
Narrative (maximum of 1/2 page)
A concise narrative or a synopsis of the proposed project/program, that generally covers the following:
- The purpose of the request (project or program)
- The problem or need being addressed, and how you will address the identified problem or need
- The population or community served by your organization
- How your project or program will promote long-term change
For project or program finding requests, you will usually need to submit both a project/program budget and a general operating budget. However, for general support requests, you will usually only need to submit a general operating budget.
Generally, inquiry letters are no more than 2 or 3 pages, typed on letterhead, signed by CEO/Board Chair. Always follow the exact guidelines specified by grantmakers.
This is sample inquiry letter.
May 1, 201*
Community Help Foundation
100 Main Street
Any-City, Any-State, USA
Re: Letter of Inquiry
Dear Mr. Grant Maker:
Thank you for our recent meeting at the Community-Based Organization Conference where you were kind enough to visit with our staff and take the time to learn about our mission and current projects. We thoroughly enjoyed your visit with us, and sincerely appreciate your thoughtful attention to Neighborhood Improvement Association, Inc. (NIA)
Your interest in NIA is a significant acknowledgment of our successful track record of delivering superior community improvement projects for nearly 15 years.
We are aware that the Community Help Foundation distributes a number of grants for community improvement and development purposes. We wish to apply for one of the Foundation's grants.
NIA has enjoyed a significant growth within the last ten years. Last year, NIA launched five new programs, including a community day care center, computer training center, substance abuse program, and an alternative learning program for high school drop-outs. We delivered a total of $15 million in community improvement projects in one year alone; an outstanding record of achievement. Our staff has doubled in an effort to effectively administer our new programs as well as keep pace with our organization's growing administrative responsibilities.
I am pleased to write to you about a project that I believe will be of interest to the Foundation. The NIA is seeking $550,000 over three years to expand its very successful Tech Ed (Technical Education) program to provide aggressive, hands-on computer training and alternative education programs in our inner-city neighborhoods.
Tech Ed is a highly effective five-year-old academic enrichment program for inner-city junior high and high school students. Formed through a partnership between NIA, the local college and the city's school district, the program currently has a total enrollment of 500 students, and is funded by the school district and matching HUD CD funds which are administered by the city.
The newly expanded PUTER (People Using Tech Ed Resources) outreach program will, utilizing the resources and leadership of Tech Ed students, bring computer skills and knowledge to high school drop-outs, underskilled and unemployed adults, single parents, and other community members lacking the adequate computer skills and educational resources needed to secure and maintain skilled jobs with which to support themselves and their families.
We are seeking support from the Foundation to enable us to develop a pilot PUTER program and demonstrate its soundness and effectiveness to the Tech Ed funders, the city, community development agencies, and local private funding sources for future funding of the long-term program.
We ask for your partnership because of the Foundation's demonstrated interest in alternative education and youth leadership development, especially for those from the underrepresented minority communities.
We critically need funds to launch this sorely needed computer training program, fund the equipment, software, and the resources of two teachers to oversee and assist the volunteer student educators. These equipment and support resources will constructively assist the 2,500 undereducated minority residents to be served by our new community service program. The ethnic composition is approximately 49% Hispanic, 39% African-American, 9% Asian-American, and 2% Other.
NIA has already raised an initial investment of more than $50,000 in absolutely necessary computer equipment toward a computer systems, training and services budget of more than $1 million. We have worked hard to bridge the gap and anticipate receiving grants and donations totaling $300,000 from private sector sources, banks, foundations and private donors.
Despite our general fundraising efforts, our program budget is far from balanced. Cuts in government financing continue, with more expected, especially those affecting our clients with incomes below poverty level.
Undaunted, NIA is an organization committed to excellence, with a clear vision and a passion for delivering outstanding results. We ask you to work with us to capitalize on our growth and these strengths.
Over the years the Foundation has proven the effectiveness of youth leadership development and community-based programs. The Foundation has helped to demonstrate that community outreach programs which are developed and managed by a community for a community make a striking impact. With the partnership of the Foundation, our young Tech Ed leaders will bring vital alternative education and critically-need training skills to their neighbors, family members and peers, and, in so doing, will effect positive change in their own communities.
Tech Ed student teachers will serve as a model outreach volunteer corps and for our inner-city neighborhoods throughout the country. The Tech Ed program has attracted national attention as an innovative prototype for academic enrichment, and has been replicated in at least four major cities already.
The challenge at this stage is to seize the opportunity, to take the risk, to realize an innovative, new, rewarding and productive future. With the strength which has made NIA and the Tech Ed program what it is today, the choice is an easy one -- help our community meet the challenges of the 21st Century.
The need for effective computer training and education cannot be overstated. The technical training requirements of our community are overwhelming and mirror the needs of most other inner-city populations. The PUTER program is ready to be launched as a national model for all inner city community organizations everywhere for building a future, uplifting individuals, creating self-sufficiency.
Thank you for your support and assistance to NIA, and the community residents it serves. We look forward to your consideration of our request and the opportunity to submit a formal proposal for your review. We will be pleased to submit additional information at your request. Please do not hesitate to contact me at (telephone number).
A strong Business Plan may not guarantee success; but it could certainly prevent failure!
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