Types Of Funding

Posted on by Prapti

Funding a new business or the expansion of an existing one can be challenging for any entrepreneur.

Capital can come from a variety of sources such as raising money through family members, personal

loans or lines of credit from a financial institution, low interest business loans and of course government

and corporate grants

What is a Business Grant?

The simplest definition of a business grant is an endowment of financial aid from an agency enabling the

owner(s) to start or continue carrying out a business. The grantor will have specific criteria that must be

met in order qualify for any grants being offered.

Who Offers Small Business Grants?   19

Grants are available from the federal government, state, local and county government departments and

many large private corporations or foundations for a specific use.

Federal Government

Federal grants are generally not awarded directly to individuals or small businesses but are instead

filtered through other agencies or local and state departments. This process makes it very difficult to

locate and apply for business grants unless you know exactly where to look for them. One exception in

being eligible to receive direct federal grant money is a non‐profit agency whose activities are designed

for charitable purposes and one that has been awarded a 501(c) (3) status, making it tax exempt under

IRS tax code regulations.

Federal Government grant money must be used for an activity or service that provides a measurable

benefit to the public. It cannot be used to benefit any government department through acquisition of

property or in the delivery of services.

The U.S. Department of Health and Human Services (HHS) does offer grant opportunities through

Grants.gov and provides information on grant eligibility at http://www.grants.gov/.

The majority of organizations that meet eligibility requirements for direct grant funding are as follows:

 Educational Organizations such as independent school districts, public and state controlled higher

education institutions and private higher educational institutions.

 Government Organizations including local, state, city/township governments, Native American tribal

governments and special district governments.

 Non‐Profit Organizations that have been granted a 501(c) (3) status with the IRS, some non‐profits,

other than higher educational institutions that do not have a 501(c)(3) status.

 Public Housing Organizations such as Native or Public Housing Authorities who meet the grant

requirements.

 For‐Profit Organizations that do not have a “small business” designation but do meet the size

standards for industry as set out by the U.S. Small Business Administration (SBA).

These predetermined standards are:

• 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    20

State and Local Grants

Economic Development Agencies exist in every state and aid to develop new businesses and grow

already established companies. Some of the services they offer include:

• Help in recruiting employees

• Assistance with employee training

• Advice on starting a new business

• How to choose a location or site for your business

• Financial help in securing tax‐exempt bonds, grants and loans

A complete list of links to each state’s Economic Development Agency is provided in the Helpful Links

and Resources section of this manual.

Private Grant Sources

There are a number of private corporations, foundations and business groups that also offer grants to

innovative businesses that meet the set out criteria. Some are easier to apply for than others, all have

pre‐determined limits on the size of grants being awarded and most require a completed business plan

for eligibility.

One such organization is the Idea Café whose website can be found at:

http://www.businessownersideacafe.com/small_business_grants/index.php.

There are no fees required to apply and it’s open to anyone who is planning to start a new business or

expand on an existing one. At Business.gov you can answer a few simple questions about location,

business type, etc. and be directed to a list of organizations that offer grants that match your specific

conditions. Their site can be found at http://search.business.gov/startLoans.html .

Grants for a technology company generally have a high rate of success. The federal government offers

grant opportunities through the Small Business Technology (STTR) and the Small

Business Innovation Research (SBIR) programs and awards more than $2 billion annually, subject to

eligibility. In Ohio TechColumbus offers grants that help entrepreneurs assess ideas in the field of

technology to help them ascertain if their idea can be turned into a viable business. Your local Chamber

of Commerce and your Secretary of State Office will often have this kind of information.

Although it is a little more difficult to find non‐technology focused small business grants there are still a

number of options. Your business may qualify for Small Business Certification if the owner falls into

specific categories such as a woman or veteran owned company or plan to operate a business for a

disadvantaged group. Once again, your Secretary of State office is a very useful resource in this area.  21

There is no doubt that if you are willing to put some effort into researching the area of grants you will be

able to find numerous resources that could lead you to the grant that fits your business. Immerse

yourself in the world of business, large and small, read trade magazines, talk to other entrepreneurs and

visit sites that offer free advice. One such online business magazine, The Philanthropy News Digest, will

keep you informed of companies and corporations that award grants as well as general information

about the business world. You can visit their site at: http://foundationcenter.org/pnd/.

When you are ready to begin sorting through the different types of grants available that match your

skills, read through the Helpful Links and Resources section of this manual and begin selecting the links

that pertain to your specific needs and the state or county that your business will be located in.

Foundation Grants

There are a large number of U.S. foundations and public charities that offer grants which are generally

designed for non‐profit organizations. Even if your business is a for‐profit company there are ways that

you can incorporate a non‐profit entity to an existing business. If for example, you own a store that sells

musical equipment you could attach a non‐profit department that offers music lessons to

underprivileged children or some other disadvantaged group within your community.

Some of the foundations that regularly make grant opportunities available are:

• The Bernard Osher Foundation of California

• Carnegie Corporation of New York

• Greater Milwaukee Foundation of Wisconsin

• The Arthur Vining Davis Foundation of Florida

A more detailed list along with links can be found in the Helpful Links and Resources section of this

manual. Grant money from these foundations and charitable organizations are made available for very

specific projects and not for the company as a whole. In order to qualify you may need to refurbish your

business structure so that it fits into a different category. It is important to remember that wherever

your grant money comes from, the details of how and what you can spend it on will be outlined by the

grantor. These guidelines will have to be strictly followed to retain your eligibility.

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