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Federal Funding Programs for Small Businesses Startups

14 min read

Small business owners often struggle to understand how to raise money to help them launch their startups. Too many rush into taking on investors who consume part of their company’s profits and have a say in important decisions, even when their views don’t align with the founder’s vision.

For these reasons, we recommend that when you’re starting out, you look into what your federal government can do for you. You might be surprised that there is “free money” available through small business grants, and low-cost loans from the Small Business Administration — both perfect opportunities to get your hands on federal funding for startups.

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Small Business Grants

First, a word about small business grants.

Though there are countless programs available at Grants.gov, remember: you don’t just fill out a form and wait to cash in. For any government grant program, you can expect a good amount of paperwork to fill out, and a waiting period to see if you qualify. These grants are built around providing access to company missions that will prove assets to their community, so also remember that the proof will be in the pudding.

For the purpose of this article, we will be focusing mostly on government grants located in the United States for residents and US-based businesses. But even if you’re located outside the US, many of these tips are applicable, and we encourage you to look into the specifics of obtaining a government grant, no matter where you live.

To give you the best chances of getting a small business grant, the government advises that you thoroughly review all of the eligibility guidelines before applying. There will be technical, legal, and administrative prerequisites, and assuming you get the funding, there will be ongoing reporting and bookkeeping, as well as audits to ensure you are living up to the terms of the grant.

Examples of Federal Grants

Small Business Technology Transfer Program (STTR)

This program funds research in the R&D arena. However, for this grant, the small business needs to have a formal collaboration with a research institution. To qualify for STTR grants, you must operate a for-profit company and satisfy other requirements.

U.S. Department of Agriculture Rural Development Business Programs

The USDA’s Rural Development Business Programs provide financial support and technical assistance to promote rural business growth. They offer loans, grants, and guarantees with the goal of enhancing economic opportunities and job creation in rural communities.

U.S. Department of Commerce Minority Business Development Agency (MBDA)

These grants and  loans are designed to help minority-owned businesses and are offered throughout the year. Minority-owned businesses can find information about local MBDA Business Centers at MBDA.gov.

U.S. Department of Education Grants

The U.S. Department of Education (DOE) has various grants available to small businesses in the education sector. These grants can be made available for public schools, state agencies, or nonprofit organizations; however, also allows for applications from for-profit private sector companies. Deadlines for currently available DOE grants run through December 12, 2024, with more grant opportunities coming soon.

U.S. Small Business Administration State Trade Expansion Program (STEP)

This program distributes federal funds through state entities and is intended to assist small businesses desiring to export their products, participate in foreign trade missions and shows, obtain entry to foreign markets, develop websites, and design international marketing products or campaigns.

U.S. Economic Development Administration (EDA)

The EDA is part of the U.S. Department of Commerce and offers ongoing funding opportunities for projects that support regional and national economic development including construction, planning, technical assistance, research and evaluation, higher education, and more.

State & Local Governments

You should also know that many federal grants for small businesses are distributed to state and local governments, so you should always check there, too, for specific programs that could help out your business. Speaking of specific programs, grants are not typically general in nature — meaning that they are meant to serve a certain purpose. Here are a few examples:

The FedEx Small Business Grant is a popular program (though technically FedEx is not a federal entity) that requires businesses to have shipping needs.

Small Business Loans

If you’re looking for a federal loan, there is no better place to start than at the U.S. Small Business Administration (SBA). You may have heard of the SBA before, but did you know that in addition to helping you secure loans, they will guide you through planning, launching, managing and growing your business?

At your fingertips, you will have access to free business consulting from experts and funded partner organizations like America’s Small Business Development Center (SBDC) network, which runs community-based offices across the country. Though the SBA is where you go for federal funding for your startup, the SBDC will save you money by providing:

  • Free business consulting
  • Advice for accessing capital
  • Business planning
  • Technology development
  • Regulatory compliance
  • Marketing
  • International trade assistance

When you are ready to apply for funding from the SBA, they will match you to lenders near you that specialize in SBA-guaranteed loans. The agency itself doesn’t lend money directly to small businesses but instead sets guidelines to reduce the risk for both you and the lender.

These loans provide many benefits, like competitive terms, rates, and fees. Some loans come with ongoing support to help you start and run your business. And they offer lower down payments and flexibility you won’t find on your own.

The loans you can get from the SBA include:

7(1) loans — This is the most common SBA loan, and is used for short- and long-term working capital, purchasing office furniture and supplies, and even refinancing business debt you may already have. The maximum amount that can be borrowed is a whopping $5 million!

504 loans — This loan also comes with a $5 million cap and provides a fixed rate to finance major fixed assets that are used for business growth or creating jobs. Assets include things like existing buildings or land, new facilities, machinery, and equipment.

Microloans — These loans provide up to $50,000 to help startups launch or expand. The average loan is about $13,000 and is typically used to help small businesses expand with working capital, inventory, supplies, furniture, fixtures, equipment, or anything else that can enhance the business. Microloans cannot, however, be used to buy real estate or refinance existing debt.

The final loan worth mentioning that is offered by the SBA is the 8(a) Business Development program. This program is targeted at helping small disadvantaged businesses — those that are owned and controlled by socially and economically disadvantaged individuals. The goal of the program is to help “socially and economically disadvantaged entrepreneurs” help to “gain a foothold in government contracting.”

Unlike other loan programs, this program is divided into a four-year developmental stage and a five-year transition stage. The benefit, however, is that businesses that qualify may be able to receive contracts up to $4 million for goods and services, and $6.5 million for manufacturing. Not only that but each individual participant, for the life of the program, is entitled to up to $100 million in contracts!

And as if that wasn’t enough, participants will get specialized business training, counseling, marketing assistance, and even executive development — all provided by the SBA and its partners. Plus, you may even be eligible to access surplus government property and supplies, SBA loans, and bonding assistance.

As with other programs, you will be expected to live up to certain goals and criteria on an ongoing basis, which the SBA will monitor through annual reviews, business planning, and ongoing evaluations.

Startup Business Grants From Private Companies and Nonprofits

Although we have been talking about federal and government grants and loans, there are also some great opportunities for grants in the private sector that are worth mentioning.

Many corporations and large nonprofits, like the National Association for the Self-Employed, offer startup business grants or organize grant competitions. Some national opportunities include:

Faire Small-Business Grant

If you own an independent retail store that opened within the last year — or plan to open this year — you may qualify for the Faire Small-Business Grant. This new business grant offers $5,000 in Faire credit to independent retailers based in the U.S. The credit can be used to purchase inventory through Faire.com.

Fast Break for Small Business

This grant program is funded by LegalZoom, the NBA, WNBA and NBA G-League and administered by Accion Opportunity Fund. You can win a $10,000 business grant plus $500 worth of LegalZoom services. To qualify, you have to be a U.S.-based business with at least three months in business.

ZenBusiness Grant Program

The ZenBusiness Grant Program offers $5,000 each month to new businesses that offer products and services that help their communities. To qualify, you must be at least 18 years old and have used ZenBusiness formation services within the last three to six months.

Amber Grant for Women

WomensNet gives three $10,000 Amber Grants each month and three $25,000 grants annually. Although startups are eligible for all grants, one of the monthly $10,000 grants is specifically geared toward new businesses. Filling out one application makes you eligible for all Amber Grants. To qualify, businesses must be at least 50% women-owned and based in the U.S. or Canada.

National Association for the Self-Employed Growth Grant

When you join NASE, you can apply for quarterly Growth Grant opportunities. There are no time-in-business requirements for these grants of up to $4,000, but you’ll need to provide details about how you plan to use the grant and how it will help your business grow.

Venmo Small Business Grant

The annual Venmo Small Business Grant offers $10,000 grants to 20 business owners. This program also provides mentorship from industry leaders and the opportunity to be featured on Venmo’s social media pages. To qualify, you need to have a U.S. Venmo business account in good standing. The business should have less than 10 employees, less than $50,000 in annual sales and have sold $500 or more in goods and services at least three months before the start of the grant program.

Tory Burch Foundation Fellows Program

The Tory Burch Foundation Fellows Program is designed to provide funding, education and other resources to women-owned startup businesses. To qualify for this startup grant program, you must be a women entrepreneur who owns 51% or more of your business. Your company must have been in business ranging from one to five years and generates revenue (the program prefers a minimum of $75,000).

Freed Fellowship Grant

The Freed Fellowship grant program offers a $500 grant to small-business owners each month. All applicants get feedback from the Freed Studio and recommendations on how to grow their business. They also receive two months of free mentoring in the Freed Studio virtual community.

Trust in Yourself

So what are you waiting for? Check out all of these sources of federal funding for startups, and as mentioned, don’t forget to research programs available in your state and locale. The federal government does its best to offer free money to stimulate small businesses through grant programs, and because there are so many programs, much of the money goes unclaimed each year.

Small business grants can be competitive, so don’t lose hope if you don’t qualify or aren’t accepted into a program right away. Turn to the SBA and SBDC in your area to qualify for low-cost, low-interest loans that you can pay back quickly once your business gets off the ground. The government trusts you can do it  now it’s up to you to put in the work and trust in yourself.

 

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About the author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.

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