How Does a Small Business Grant Work?

Dani Simmonds


Small business grants are typically geared toward accomplishing a specific goal, such as starting a business, obtaining business training, or acquiring new equipment. In the application process, small businesses must show that they meet the requirements for the grant and that they have a need in the area the grant covers. For example, if a grant is for accounting training for a woman-owned business, the applicant must prove that a woman indeed owns the company, that the company needs accounting training, and that the funds will be used for that training.

Awarding of the grant

Most small business grants are awarded on a competitive basis, which means that all applicants compete for the same pool of money. A few grants are merit-based, which means that the first applicants that meet the qualifications will receive the grant. For nearly all grants, an appointed committee reviews the applications, eliminates the ones who do not meet the requirements and then chooses those who will receive grant funding from the applicants that most closely meet the requirements, best demonstrate a need for the grant, and have established that they will properly manage the grant money.

Grant management

After a grant is awarded, a small business grant is not complete. A recipient must follow up on the grant by reporting exactly what was done with the grant money and proving that it was used for the intended purpose. In most cases, this is done by filing a written report and an accounting with the grantor, but in some cases additional follow-up is required, such as submitting pictures or related newspaper articles.

Identifying Grant Opportunities

Before a small business grant can be awarded, applicants must identify grant opportunities that are right for their situation. Although the federal government is a common source of grants, it is not a good source for small business grants. The federal government provides money to states, counties and non-profit organizations that in turn provide small business grants. The federal government does, however, maintain a website, which is listed in the Additional Resources section, to help applicants find grants. Many private corporations offer small business grants as well, and these are often easier to obtain. The Small Business Administration (SBA) assists business owners in locating grants, and the Development Director website maintains a "corporate giving database" that is useful for finding grants. Links to SBA and Development Director are in the Additional Resources section.