When you decide to open your own business, you might think about securing financing through the various types of government grants for small businesses. While infomercials make it seem like anyone with an idea can get government funds, the government actually doesn’t offer that many grant programs. Many of the grants you’ll find today are only available for specific types of people or specific industries. After comparing those grants, you may find that a loan is a better alternative.
Research & Development Grants
One of the types of government grants for small businesses available is for those working in research and development. According to the United States Small Business Administration, the average R&D grant awarded is more than $620,000 and the government awarded around 300 of these loans. Before you apply though, keep in mind that the government generally awards these grants to businesses that can the nation or the government itself. A company working on a new type of vaccine or weapon has a better chance of getting an R&D grant than someone designing a new cell phone does.
Grants for Minorities
The government also awards grants through its 8(a) program, which it designed for minority business owners. To qualify for one of these grants, you must show that your minority status puts you at both an economic and social disadvantage. Someone who is African American might show that he or she has a harder time securing a loan and running a successful business because of skin color. This grant program is also open to those of different ethnicities like Hispanics, Pacific Americans and Japanese Americans. If you become a member of this program, you must agree to work with a more experienced mentor.
Unique Grants
Smaller government grants may not provide you with all the funds you need for your company, but you can get enough to pay some of your costs. One example is a historic preservation grant. These grants go to those preserving and rehabilitating older structures. If you agree to follow the Department of the Interior’s standards for rehabilitation, you may qualify for grants from both the state and federal government. Other grants are available to women who run their own businesses and those working in certain industries like health care.
SBA Loans
After looking at the different types of government grants for small businesses, compare those grants to the loans you can secure through the Small Business Administration. Unlike traditional lenders, the SBA will act like a guarantor for your loan. You have the chance to pick the bank or credit union you want to work with. That lender will provide you a small business loan, and the SBA will secure that loan. This lets the lender know that if you default on your contract that the SBA will take over the loan. This increases the chances of you obtaining the money you need. You must meet specific requirements before the SBA will secure your loan.
Related Resource: What is an Investment Startup Matching Service?
Government grants can help you run your business, but the government restricts how you can use those funds and will not give grants to help you open a new business. Some of the types of government grants for small businesses that you can get include grants for minorities and R&D grants that serve as alternatives to SBA loans.
