What are Small Business Grants?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 29 December 2019
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Small business grants are funds made available to qualified entrepreneurs to either start up a new business or expand an existing small business. The main function of a small business grant is to provide resources that aid in stimulating economic growth. By granting these resources to small businesses, the hope is that the business will have time to become profitable and begin to contribute to the overall economic well being of the city or town where the business is located.

Small business grants are different from small business loans. With a loan, there is the expectation that the funds extended in the transaction will eventually be repaid in full. With a small business grant, the company is not expected to repay the face value of the funds received. The general perception is that if the business succeeds, the boost to the local economy will over time justify the amount of funds that were given to the company.

Generally speaking, small business grants are not distributed under the auspices of a national or federal government. In most cases, either state or local agencies offer business grants of this type. There are also some philanthropic organizations that offer small business grants.


While many people seek grants for starting a small business, not everyone will meet the qualifications necessary to obtain the grant. The qualification process is often very exacting and can take anywhere from a few months to a year. Applicants must be able to convince the granting agency that there is a need for the business to be established within a given locality, that it has a relatively good chance of becoming profitable, and that it will add to the long term economic growth of the area.

Finding appropriate small business grants may take some time. A good place to begin is with a local or state economic development office or department. However, there are also private organizations that issue one-time small business grants as well. Once potential sources of grants are identified, it is important to read the qualifications and submission processes thoroughly. Available funds are often limited to fixed amounts per fiscal year. This makes timing the submission of an application as important as making sure that the applicant meets all the basic criteria for the grant.

Since the evaluation process can take several months, it is important for small business owners to exercise a great deal of patience. At the same time, the owner should be prepared to offer additional information and supporting documents while the application is being evaluated. This includes sharing the business plan and possibly providing copies of outside audits to confirm the current financial status of the business.



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