Small Business Grants

It's important to know that the U.S. Federal Government, as a rule, does not award small business grants to most private for-profit businesses. Unless you are a 501C3 non-profit agency that is organized for charitable purposes and tax exempt under the IRS tax code, your small business is not eligible for federal grants.

That's the bad news. The good news is there are federal resources available for qualified small businesses to apply for other than grants.

The U.S. Small Business Administration (SBA) is the federal agency created in 1953 to help Americans start, build and grow businesses. The SBA serves people in the United States, American Samoa, Puerto Rico, the U.S. Virgin Islands and Guam. Although the SBA does not award grants to start or expand small businesses, they do have loan, surety bond, and venture capital programs available.

The Small Business Administration is primarily a guarantor of loans, meaning that the federal government does not loan money directly to small businesses; they guarantee the loans made by lending institutions to qualified small businesses, making it easier for small businesses to qualify for loans they might not otherwise be eligible for. Below is just a portion of the SBA loan programs that may be able to help American small businesses.

  1. Basic 7(a) Loan Program: Loan proceeds can be used for working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements, and debt refinancing under special conditions. Loan maturity is usually up to 10 years for working capital and 25 years for fixed assets. This loan targets start-up and existing small businesses.
     
  2. 504 Loan Program: Provides long-term fixed-rate financing to small businesses to acquire real estate, machinery or equipment for expansion or modernization. These loans are usually delivered through a Certified Development Company (CDC) with liens placed on the collateral and a contribution of 10% equity from the borrower.
     
  3. Microloan 7(m) Loan Program: These loans target small businesses and nonprofit childcare centers needing small-scale financing and technical assistance for startup or expansion. Provides short-term loans up to $35,000 for working capital, inventory, supplies, furniture, fixtures, machinery or equipment. Proceeds cannot be used to buy real estate or to pay off existing debt. The loans are not guaranteed by the SBA. The SBA makes or guarantees a loan to an intermediary who then turns around and lends the money to a qualified small business. Intermediaries are nonprofit agencies who have experience in lending and technical assistance. The Microloan Program is available in selected locations in most states.
     
  4. Loan Prequalification: Allows business applicants to have their loan applications of $250,000 or less analyzed and potentially sanctioned by the SBA before they are taken to lenders for consideration.

With the Surety Bond Guarantee Program (SBG), the SBA helps small businesses obtain surety bonds that they cannot obtain on their own. What is a surety bond? A surety bond is a type of insurance that protects a project owner in the case that a contractor cannot complete the project. Most large federal, state, and city construction grants require a surety bond. If a surety bond has not been acquired in advance, the contractor will not be awarded the grant money. As with business loans, the SBA does not directly issue surety bonds but they do work with surety companies to guarantee the bond.

Along with loans and surety bonds, the Small Business Administration also helps small businesses obtain venture capital. Venture capital is a cash investment directly into a small business in exchange for a percentage ownership in the business. The SBA's New Markets Venture Capital program (NMVC), in partnership with private investors, helps small businesses in low income areas obtain venture capital financing. The investment funds can then be used by the small businesses to employ residents within their low income area. To qualify, the business must be worth less than $6million and have a profit of less than $2million in the past 2 years. Also, the business must be located in a county with a poverty rate of at least 20%, a metro area where 50% or more of the residents receive the Low Income Housing Tax Credit, or a rural area where the median household income is less than 80% of the state's median household income.

The SBA does have an exception to the "no federal grants" rule for small businesses, but it is targeted to innovation research and high technology companies. The Small Business Innovation Research Program (SBIR) is a highly competitive program that funds the startup and commercial development stages of an innovative technology, product or service. The Small Business Technology Transfer Program (STTR) is another competitive program that awards small business grants to businesses which partner with nonprofit research institutions for the commercialization of technology products. You can research all available assistance at the Small Business Administration website at sba.gov.

You can also find SBA grants in our agency listing for Small Business Administration Federal Grants here at FederalGrants.com. Furthermore, a search of our database for "small business" grants will show hundreds of past grants for small and medium enterprises. Finally, the following is a list of small business grants that are accepting applications as of Wednesday, December 6th, 2023:


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