The Small Business Grant Misnomer

Business owners seeking grants for their businesses must understand the process. Grants, just like other methods of financing, have their unique qualities. Knowing how and when to access grant funding is important in not wasting time and money, then not winning the grant.

Start ups and small business owners are consistently seeking financing for their businesses. This is one topic or area of their business that is a big concern, especially with today’s economic climate. These business owners are oftentimes not adequately exposed to the various ways of financing their businesses as some seasoned entrepreneurs are.

In many instances, start up and small business owners tend to seek out Small Business Grants, Angel Investing or even Venture Capital financing at the start. These financing options are all they know outside of their banks. They will exhaust all of these avenues without successfully accessing the capital they need.

For this article, I will focus on the “Small Business Grant”. Small business grants are continuously being sought after by small business owners and start ups. They consider this “Free Money” and figure it is easier to get. They spend time researching and applying but are not qualifying for these grants. Why? Read on to learn more.

Even the Small Business Administration (SBA) states on their “Facts about Government Grants” web page that the SBA “does NOT provide grants for starting or expanding a business”. The big question is “Why call it “Small Business Grants”?” This is the misnomer.

What these start ups and small business owners do not pay attention to is the fact that “small business grants” are for “NON-PROFIT” organizations or businesses that are “Not-For-Profit”. These organizations must have the classified designation by law in order to qualify for said grants. These classifications are not LLCs, INCs, LPs companies, or SPs that are “FOR PROFIT”, but are 501(C) organizations or companies as identified by the Internal Revenue Service (IRS). This means that your company must be a charitable organization and classified as tax exempted. Be sure to check the IRS website for more on this.

Small Business Grants are for those businesses as classified by the 501(C) IRS designation that can come up with an idea or ideas that will solve an issue or need locally, regionally, or nationally. Remember, non-profit and not-for-profit organizations are considered businesses also; they just do not focus on profit as the bottom line. Your company or organization must provide a service or solution that benefits a community in need. Let’s consider this scenario: Your company can provide a service or solution to a community that have many teenagers roaming the streets, then you can certainly apply and possibly qualify for a grant based on the solution you present.

So, if your start up or small business fits this format, go for it. If it does not fit, then you need to learn what other financing methods are available for your small business. Check your local area business organizations or small business technical locations that can direct you in your quest to access capital.