Free Startup Money: Where & How To Get A Grant To Start A Business
Does your startup need funding? Grants offer free money to good applicants, but they're not as easy to apply for as you might think.
Free money to start a small business—isn’t that every entrepreneur’s wildest dream? It’s too bad that startup grants are so hard to come by. You can think of business grants as sort of like scholarships for adults. Just as with a scholarship, you have to convince the grant-issuer that a) you will put the funds to good use, and b) you are more deserving of the money than other applicants.
There are many types of business grants offered by myriad organizations, both public and private. As you might figure, eligibility requirements vary for different grants. In general, though, only certain types of private businesses are eligible for grants. These may include economically disadvantaged business owners and businesses that add value to their local communities. There are also grants for innovative businesses breaking new frontiers that benefit society—think green tech startups, doctors, and scientists.
In this post, I’ll talk about the types of businesses that might qualify for a startup grant and give a few examples of organizations that offer grants to these businesses. Plus, I’ll give you some tips to help answer the question of: “How do I get free money to start a business?”
Table of Contents
What Type Of Startups Are Qualified For Grants?
Not all startups are qualified for business grants. Organizations that run grant programs want to invest in businesses that truly deserve funding and will put the grant money to good use. Usually, when it comes to privately owned, for-profit businesses, your business must belong to a specific industry, and you must have already demonstrated that your business has a strong potential for growth. For example, perhaps you have developed an innovative app or service that already has a growing subscriber base.
There are also startups grants to help businesses and nonprofits that will have a positive impact on their community or on society in general—for example, you might be eligible for a startup grant if you have designed a product or service that helps women, or if you own a sustainable, green business.
Finally, you might qualify for a startup grant if you belong to a marginalized group or have an economic disadvantage that makes it harder to get ahead—for example, you are a disabled veteran, you have a Black woman-owned business, or your business has been financially impacted by COVID or another disaster. These grants aim to “level the playing field” to lift up entrepreneurs belonging to demographics that have traditionally been excluded from business financing, as well as those who have experienced personal hardship.
If none of these categories really describes your startup, you may need a startup loan to fund your business. In this case, read Small Business Startup Loans: Your 8 Best Options.
Grants By Business Type
Grants usually have a narrower scope than loans, meaning that each grant is usually for a specific type of business or purpose. “Type,” however, can refer to anything from specific industries to localities, the demographics of the business owner, or to a specific problem the grant is trying to address.
Let’s take a look at some of the more common categories.
Many startup business grants are for innovators and businesses that create novel, potentially disruptive products. These grants are generally for entrepreneurs in technology, medicine, science, agriculture, education, and research and development. Here are some grants you might qualify for if your business falls into this category.
Innovation grant resources:
- Grants.gov: A useful site for finding any type of grant. However, the majority are for businesses and nonprofits in science, medicine, and research and development. Search for grants on grants.gov or check your eligibility to apply for a grant from the federal government.
- Small Business Innovation Research (SBIR): This SBA-powered seed fund program awards grants of up to $150K in Phase I of funding. Depending on the results achieved after six months, recipients may receive up to $1 million over the next two years (Phase II). Phase III, when applicable, involves the commercialization of the product you’ve developed.
- The US Economic Development Administration (EDA): The US Economic Development Administration is a bureau within the US Department of Commerce that focuses on sustainable job growth through regional investment and strategy. The bureau offers a number of grants for businesses, with some aimed at research and development. Startups operating in economically distressed areas may also have some additional opportunities here.
There are some public and private grants for green businesses, including startups. Generally, these grants cover the cost of installing sustainable infrastructure and/or energy systems. Some examples include:
- Rural Energy For America Program: As part of the USDA (US Department of Agriculture), this program awards renewable energy and energy efficiency grants. Grants are awarded to agricultural producers and rural small businesses for renewable energy systems or energy efficiency improvements.
- Database Of State Incentives For Renewables & Efficiency (DSIRE): Operated by N.C. Clean Energy Technology Center and funded by the US Department of Energy, DSIRE keeps an active database of green energy incentives across the country. Since most green energy grants are offered at the state level, it’s a great resource for finding grants in all 50 states.
Various grants aim to stimulate the economy in rural and economically distressed areas. These grants serve to attract new businesses to struggling regions. Depending on where you are opening your business or nonprofit — and the specifics of your organization’s goals — you might be eligible for some of this grant money.
- Rural Business Development: This USDA grant is specifically for nonprofit and public entities. From the same agency, rural farmers/agricultural producers might be eligible for the Value Added Producer grant. For-profit businesses that provide education or health care to rural areas through telecommunications might be eligible for the Distance Learning and Telemedicine grant.
- US Economic Development Assistance Grants: The EDA supports development in economically distressed areas of the United States by fostering job creation and attracting private investment. Specifically, under the Economic Development Assistance program’s (EDAP) Notice of Funding Availability (NOFA), EDA will make construction, non-construction, and revolving loan fund investments under the Public Works and Economic Adjustment Assistance (EAA) Programs.
There are a number of business grants you can qualify for as female entrepreneur. Additionally, some grant money goes to businesses that create solutions that benefit women and families. If your startup is woman-owned, you may qualify for grants such as:
- Amber Grants
- Cartier Women’s Initiative
- Tory Burch’s Foundation Fellows Program
- Women Founders Network Fast Pitch Competition
- Women Who Tech
You can read about some of these grants in-depth in our The Best Business Grants For Women feature.
There’s a bit more to business grants for women:
Nonprofit startups that have 501(c)(3) status with the IRS are eligible for some government and private grant money. In fact, you’re much more likely to be awarded a grant if you run a nonprofit organization, as opposed to a for-profit business.
There are tons of grants for nonprofit organizations. Here are some places you can find them:
- Grant Gopher
- Walmart Local Community Grants
You can read about some of these options in-depth in our Find The Next Grant For Your Nonprofit Through One Of These 7 Resources feature.
Veteran business grant money includes retraining grants for veterans returning to civilian life and grants to nonprofits providing services to veterans. Some good places to start looking for grants for veteran-related businesses include:
- National Association For The Self-Employed Growth Grants
- FedEx Small Business Grant Program
- USDA Rural Business Enterprise Grant Program
You can read more about these resources in our The Best Business Grants For Veterans feature.
The more active categories of grants are those aimed at businesses that are at least 51% owned by an individual classified as a minority. Some of these are scoped broadly to mean “anyone who isn’t a non-Hispanic white,” while others are more directly aimed at their target demographics (e.g., Asian American, black, Native American).
Some potential grant sources for minority-owned businesses include:
- Dare To Dream Grant Program
- Native American Business Development Institute
- Office Of Minority Health Grant Programs
- Merchant Maverick Opportunity Grants
You can read more about these resources and others in our The Best Business Grants For Minorities feature.
Businesses Affected By COVID
PPP and EIDL grants are no longer available, but there are still many private and public programs dedicated to assisting small businesses that have been negatively affected by COVID. Here are some examples:
- Fiserv + Clover Back2Business Grant Program
- The Barstool Fund
- GoFundMe Small Business Relief Initiative
- KKR Small Business Builders
There is also still a lot of government CARES Act money that has been set aside for small business COVID stimulus grants, which are available through local governments. To find your local stimulus grant program, check your county and city websites.
Businesses In Specific Industries
Whatever your specific industry, you may be able to find a grant program dedicated to helping businesses in your sector excel. Usually, these highly-targeted grants are offered by industry organizations or private companies. Some examples include:
- Halstead Grants (for jewelry designers)
- eBay Up & Running Grants (for eBay sellers)
- NASE Growth Grants (for self-employed individuals, including grants for truckers)
- Grant For The Web (for monetized websites)
- Visa Anywhere Initiative (for IT startups)
At the start of your business grant search, make sure you spend plenty of time researching to find out if there are any grants available for your specific industry/business type.
Just Plain Amazing Small Businesses
There are general small business grants available to any kind of business, but they are very competitive, so you will need a super impressive story to wow the judges. An impressive track record is a particular challenge for a startup business, which is usually defined as a business that’s been around for less than six months. But hey, if you’ve achieved a lot in just a few months, or you have an especially amazing idea, you might want to apply to one of these highly competitive small business grant contests.
A couple examples:
- FedEx Small Business Grant Contest: Any type of small business may apply for the FedEx business grant. To give you an idea of what kind of competition you’d be facing, in 2021, there were 8,300 applicants and 12 winners. The grand prize is $50,000, second-place gets $30,000, and ten third-place winners get $15,000.
- Hello Alice: Startup business platform Hello Alice is currently offering $10,000 small business grants and mentorship sessions. Hello Alice also offers a separate grant for businesses affected by COVID.
You may also be able to find general startup business grants open to businesses in your town, city, county, or state.
How To Get A Startup Business Grant: Tips For Applying
You’re probably wondering about how to get a small business grant. If getting a grant were easy, there’d be no such thing as loans. Getting a grant means competing to stand out from the crowd of other applicants. While every grant is slightly different in terms of qualifications and expectations, here are some general tips for applying for grants.
Tip 1: Make Sure You’re Eligible
Ensuring eligibility is one of those obvious-sounding tips, but trust me, you do not want to put all the effort it takes to apply for a grant into one you don’t actually qualify for. If you aren’t sure if you qualify, contact a representative of the organization offering the grant and ask.
Tip 2: Tailor Your Pitch To Your Audience
Research the culture of the entity offering the grant. Are they informal and hip? Formal and professional? Are you familiar with the lingo they use? Can you put it into your application without sounding forced? You may have the best business idea in the world, but ultimately, you’ll have to convince the judges that you’re the applicant who deserves the money most.
Tip 3: Don’t Skip Any Part Of The Application
No one enjoys applications (I’m sure someone does, but you should avoid that person). Some parts are probably going to be annoying or even redundant. Do not skip them. The thing to remember about judges is they’re looking for something, anything, that will help them narrow down the field of applicants. One of the easiest ways to do that is to discard applications with big blank spaces.
Tip 4: Create A Compelling Narrative
You may not have lived a life full of adventure, but chances are you have a story to tell about yourself and how you came to be a business owner and grant applicant. Providing these details as a contiguous story with a trajectory and destination can increase your application’s chances of standing out. Ask your friends what they find interesting about you if you’re drawing blanks.
Tip 5: Be Realistic
Be honest about your business’s quantifiable details, what you need, how long it will take you to reach the goals you’ve outlined, and any risk factors involved. This isn’t for humility’s sake; it’ll help you look like you know what you’re talking about.
Tip 6: Talk About How Your Business Will Affect Your Community
Many grants for starting a business are offered with some kind of community advocacy in mind. If appropriate, talk about how your business fits into the broader tapestry of your community and how you provide the most bang for their buck.
Best Alternatives To Startup Grants
Very few private businesses are actually eligible for a business grant. Unless your business or startup is highly innovative and provides a demonstrable benefit to your community or the world at large, you are probably not grant-recipient material. Even if you are eligible for some grant money and make it through the lengthy proposal process, you may only land a few hundred to a few thousand dollars.
Furthermore, startup business grants are incredibly hard to come by, as grantees will generally want to see what kind of results you’ve achieved on other projects carried out by your organization. Don’t fall for government grant scams that will have you believe there are piles of free grant money out there for the taking—this is not the case at all.
Rather than hoping to be among the fortunate few granted free money, you might want to look into grant alternatives for your business.
Alternatives for new business grants include crowdfunding, online loans, equipment financing, and others. Some examples might include:
- Launch a Kickstarter campaign
- Get a 0% interest crowdfunded loan from Kiva U.S.
- Get a startup loan from Credibly
- Apply for a PayPal Working Capital loan
- Use Fundable for equity-based business crowdfunding
For more ideas on how to get the seed money for your new business endeavor, check out our article on the best ways to finance a business startup.