Types

• Different types of business grants are available depending on applicant profile, project type or industry. Some business grant programs operated by federal and state government agencies prioritize funding for business owners of certain ethnicities, income levels or disadvantaged groups. Some grants are available to business based on geographic region. For instance, the city of Columbus in Ohio provides funding to entrepreneurs for research in the technology industry. Also, the Illinois Department of Commerce and Economic Opportunity gives funding to business seeking to invest in recycling programs.
  
  Government programs such as the Small Business Innovation Research office specialize in funding for businesses conducting research in high-risk technologies. Grants also differ based on grantor. In addition to government agencies, grant-making public charities, American foundations and corporate giving programs provide business grants to qualified groups and individuals (see Resources).
  
  

Considerations

• Although a grant is essentially free money that does not need to be paid back, grantees must invest significant time and effort to participate in grant competitions. In addition to conducting extensive research, business owners are usually required to submit grant proposals that detail why they qualify and how they plan to use the grant money. Grant proposals must include goals, work schedules, timelines, staffing resources, budget and other information related to the project. Moreover, businesses awarded grant money must continue to perform additional work by reporting on their project's status and fulfilling objectives stated in the original proposal. It is important for businesses to weigh the pros and cons of applying to grant programs versus pursuing loans or other types of funding.
  
  

Misconceptions

• A common misconception is that there are an abundance of grants available for starting or funding a business. According to Michigan State University, the top five sources of funding for start-up business are family and friends, Small Business Administration loans, bank loans, venture capitalists and angel investors. Angel investors are usually wealthy individuals who are willing to invest in your business in return for part ownership as a stakeholder. The government gives grants, but they are specific according to particular industries, research projects or business purposes. For example, the U.S. Department of Defense awards business grants but only to technology companies that will perform research in an area that relates to a Department of Defense initiative (see Resources).
  
  

Insight

• A November 2009 CNNMoney article recommends that small-business owners focus on narrowing their research to state, county and city government grants. Businesses owned by women, minorities and veterans may qualify for certain business grants. Business looking to serve disadvantaged and lower income communities might also find federal and state grant opportunities.