The Truth About Small Business Grants From the US Government

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No matter what you may have read on the internet or seen on TV, the truth about small business grants from the U.S. government is that there are none.

The federal government does not provide grants for:

  • Starting a small business
  • Paying off small business or personal debts, like mortgages and credit cards
  • Covering business operating expenses or losses

However, there are some very specialized federal and state level grants available to small businesses that -- like most government grants -- come with some catches. These grants are available only to businesses in specific fields or industries identified by the federal or state government as being especially important to the nation or state as a whole, such as medical or scientific research and environmental conservation.

Some Special Government Grants are Available

Businesses involved in scientific research and development (R&D) may be eligible for federal grants under the Small Business Innovation Research (SBIR) program. SBIR grants can generally be used only to fund the R&D efforts of qualifying businesses to help them develop and market innovative technological products. Just like most federal grants, SBIR grants are awarded on a "competitive basis," with potentially hundreds of businesses competing for the same grants.

As a result, the application process itself can involve sizeable expenditures of money and time. Similar to federal SBIR grants, state government agencies sometimes offer "discretionary incentive grants" to businesses that, in the agencies' opinion, help stimulate the state's or region's economy and advance beneficial causes such as alternative energy development.

However -- as the SBA points out -- the stringent eligibility requirements for these state government grants often target larger employers and prevent many smaller businesses from successfully competing for them. By far the fastest, easiest and most comprehensive method of finding small business grants, loans and other financing options offered by both the federal and state governments is to use the SBA Loans and Grants Search Tool.

Note that when using the SBA Loans and Grants Search Tool, it is not necessary to select a specific industry from the search criteria list. In fact, if you leave all of the selection criteria blank and simply select a state, the tool will show you all grants, loans and other financing opportunities available to all types of businesses in the specified state.

The Grants Bottom Line

In the words of the SBA, "if you are seeking 'free money' to launch or expand your business, forget about it." Not only are government business grants difficult and often expensive to apply for, the governments awarding them typically demand some return on their taxpayers' investment.

Businesses getting these grants are strictly required to perform as promised by developing and selling new technology and benefiting the regional economy. As the SBA recommends, most small businesses or potential small business owners with a good business plan, a viable market, a great product or service, and a passion to succeed, are far better off seeking small business loans than government grants.

'Free' Government Grants? No Such Thing

You should also know that the U.S. government does not offer "free" grants to anybody. In fact, every grant awarded to anybody (rarely, if ever, to individuals) comes with long-term obligations that can be very, very expensive. Learn why a government grant is no free lunch.