Are you about starting a business? Do you want to learn how to apply and get small business grants? If yes, then I advice you read on as I explain in details how to get a small business grant. A grant is an amount of money given to an individual or business for a specific project or purpose (whether it is grants for women, minority or government grants).
Though the definition seems quite simple and straightforward, getting a grant isn’t an easy task. In fact, the difficulty starts from the very beginning—figuring out how and where to start. In this chapter, you will learn everything you need to know about business grants and how to work your way towards winning one.
Table of Content
- What is a Small Business Grant?
- Direct grant
- Repayable grant
- Soft loan
- Equity grant
- Access to free capital
- No sharing of control
- Brighter chances with other financing options
- Easy access to more grants
- Fierce competition
- Partial funding
- The specificity limitation
- Funds may be delayed
- Lengthy application process
- Less flexibility
- Business Concept
- Top 10 Additional Tips for Winning a Small Business Grant
- The YOUWIN Business Grant Program – A Case Study
- Achievements of the YOUWIN so far
What is a Small Business Grant?
A small business grant is an amount of money given to an entrepreneur to start or expand his or her business. Unlike what obtains with loans, not all grants are required to be paid back by the entrepreneur. Small business grants could come from various sources, including the government (through programs aimed at helping small business owners), international organizations (such as the EU), and non-governmental organizations.
Types of Small Business Grants
Small business grants come in various forms, such as the following:
This is a cash award, which is usually given to the entrepreneur as part of the required capital. With a direct grant, most schemes usually require the business owner to have put up a good fraction of the required cost.
This type of grant is offered to a business owner with the expectation of repayment from future revenues. However, repayable grants do not attract interest, and they are usually written off if the business fails.
This is a special type of grant with repayment conditions that are more generous than those of bank loans. The interest rates may be less, or there may be no interest at all. And the repayment terms are usually for very long periods of time.
With this type of grant, some funds are injected into the business and the provider of the grant takes an equity share in the business. This stake is usually returned when the value of the firm increases.
4 Advantages of Taking Small Business Grants
Access to free capital
Winning a grant means getting the money you need to start or expand your business. And you don’t have to repay the money in most cases. Even when you have to pay back, the repayment conditions are very friendly, such that they won’t mount any pressure on you or your business.
No sharing of control
Unlike what is obtained with equity financing, you won’t have to give up any equity or compromise your plans with shareholders.
Brighter chances with other financing options
Winning a business grant creates a general good impression about your business. That the provider deemed your business grant-worthy—among many others—really speaks volume about the prospects of your business. This explains why investors and banks will readily grant you funds when you approach them in the future.
Easy access to more grants
Once you win one grant, it becomes much easier to get another one, since you are familiar with the process and have built a relationship with the provider.
Six Disadvantages of Small Business Grants
Because so many entrepreneurs are applying for grants, the competition can be very fierce and exacting. Also, grant providers adopt stringent measures to select only few deserving businesses.
Most business grant providers expect you to raise a percentage of the needed capital yourself. That percentage varies from provider to provider, but 50% is common. So, you will need to get some money from other sources (matching funds) before or after getting the grant.
The specificity limitation
Most grant providers require that you use the funds for a specific part of your business plan, such as acquiring equipment. You won’t be allowed to spread such funds around different parts of your business.
Funds may be delayed
Some grant providers would delay the release of the grant until you have completed the project with funds from other sources. Only after the completion will the grant be released to you. This is a way of ensuring that grants are really used for the exact purposes for which they were awarded.
Lengthy application process
The application for a grant can take anything from days to months to complete, as some application forms could be several pages long and there could be a long list of required documents.
Once you get a grant, you will have to stick with your original plans. Changing your plans regarding what you will do with the grant may prompt the provider to revoke the grant.
How to Apply for a Small Business Grant – The Steps Involved
The process of applying and winning a business grant starts with your search for the opportunities available to you. Bear in mind that the more local the grant provider is, the better your chances of getting the grant, and the quicker you will get it. So, it’s easier to win a business grant awarded by a local NGO than it is to win a Federal government grant or one awarded by an international organization.
Also, you should study the eligibility requirements of any grant you stumble upon to know if your business qualifies for it. Once you have found a business grant that you think your business is eligible for, you can begin the lengthy and sometimes frustrating process of trying to win the grant. So without wasting your time, here are the steps to follow when applying for a small business grant:
a. Craft a compelling business plan. Most grant providers will scrutinize your business plan to determine if your business is really worth being supported with the grant. (Refer to the chapter on “How to Craft a Business Plan.”)
b. Read and understand the guidelines binding the application process. Violating guidelines is the shortest route to failure.
c. Consult business owners who have won grants and ask them to walk you through the process. Most grant beneficiaries will be willing to share lessons learned.
d. Since you will by now have gotten some knowledge of how grant applications work, you will need to ask yourself if it is worth applying for the grant. Do you have the skills, experience, and knowledge required to win a grant? If you can give yourself satisfactory answers, then you can proceed.
e. Put yourself in the shoes of the grant provider. Why are they giving the grant? If you can see the grant application process through their lens, you can easily position your grant proposal to address their concerns.
f. Begin working on your grant application. Read all instructions thoroughly. Gather all the materials you will need to complete the application. And carefully provide all the information required.
g. Review your application thoroughly, make a copy of it for your records, and then submit it through the specified medium.
Outline of a Typical Small Business Grant Application
Your business grant application should follow this outline:
It is your duty to explain what your business is all about and how it will help people. Be specific. Also, you need to mention how your business stands out from the competition. The rest will be covered in your business plan.
You must state how much funding you need to start or expand your business. Even if you know that only part of the funds would be granted, you need to state the needed amount in full; and be accurate with your figures.
Give an estimate of how long it will take to launch your business or the new idea.
You are not going to get a business grant without experience. You will need to provide examples of similar (or even unrelated) projects you have nurtured to success in the past.
You will need to support your business case with market findings and other relevant research findings and statistics.
You must also include short portraits of your team members. Explain how each of them will contribute to the idea and any special qualifications that make them suitable for their roles.
Top 10 Additional Tips for Winning a Small Business Grant
- You should try to apply as soon as the grant is announced. This is usually the best time to apply, since competition will be less fierce and the grant provider will be more keen to award the grants.
- If possible contact the grant provider before you apply. By making a personal contact, you will get advice and know whether it’s worth applying. You will also discover tips on how to win the grant.
- Keep yourself informed. One of the easiest ways to win a grant is to apply for as much as possible opportunities. So, keeping your eyes open will help you keep abreast of new opportunities as they are announced.
- Don’t start your project before applying for the grant. If you launch your business or the expansion before asking for the money, the provider will simply assume that starting without their assistance means you really don’t need the cash in the first place.
- Connect your application with a specific project. Usually, grants are offered for a specific reason, not simply to support a business. So, if you need new equipment or more staff to launch a new product, lay emphasis on the product, not the equipment.
- In your application, you must give strong reasons why you should get the grant, such as stating the advantages of your new product’s success, one of which could be job creation.
- While writing your application, you must pay attention to the provider’s objectives.
- Be honest, and don’t bend facts in a desperate bid to win the grant.
- You must convince the provider that there is no chance of you moving ahead with your business without the grant. This will compel them to support you.
- You must ensure that you have matching funds available, as it is very rare for a grant to cover 100 percent of your needed funds. So, the provider needs to be sure that you can put your money where your mouth is.
The YOUWIN Business Grant Program – A Case Study
The Youth Enterprise with Innovation in Nigeria (YOUWIN) project was launched by Nigerian President, Goodluck Jonathan on October 11, 2011 as one of the initiatives by the Federal Government of Nigeria to tackle the problem of mass unemployment among youths in Nigeria.
The project is the product of a collaboration between the following:
- The Ministry of Finance
- The Ministry of Communication Technology
- The Ministry of Youth Development
- The Ministry of Women Affairs and Social Development
- The World Bank
- The Private Sector
The project is implemented through an annual business plan competition for aspiring young entrepreneurs in Nigeria, in line with the Nigerian government’s drive to create more jobs for Nigerians. The project will run for three years.
The main objective of the YOUWIN program is to generate more jobs by encouraging and supporting aspiring young entrepreneurs in Nigeria to develop and execute business ideas that will lead to job creation. The specific objectives include the following:
- To attract promising entrepreneurial ideas and innovations from Nigerian youths in Universities, Polytechnics, and other post-secondary institutions;
- To select 1,200 aspiring entrepreneurs every year and support them with the funds needed to start or expand their businesses;
- To generate 80,000-110,000 new jobs for currently unemployed Nigerian youths over the three-year period for which the program will run;
- To encourage owners of existing small businesses in Nigeria to expand their businesses;
- To provide business training to 6000 aspiring youth entrepreneurs in all the country’s geo-political zones;
- To improve the visibility of young entrepreneurs in Nigeria and enable them to access a wide business professional network.
Achievements of the YOUWIN so far
The YOUWIN program has so far recorded the following achievements:
- The development of the project website through which interested participants can learn more about the project and submit their entries.
- Launch of the business plan competition in the six geo-political zones by some ministers led by those for Economy and Finance.
- Selection of winning entries and award of the first tranche of the grant to winners. A total of 3,600 winners have been selected in the three phases of the competition.
- Presidential award presentation to the best business plan in each geo-political zone.
So far, the program has been a success. However, the release of funds in installments and the delay in the release of funds to some winners have been the dark sides of the program.
Like the Nigerian government, most other state and federal governments worldwide have various grant programs in place for supporting young entrepreneurs. It is your duty to find out those available in your state or country and apply if you deem your business eligible for them.
Other financing options may be more suitable for your business and even easier for you than obtaining a business grant. So, don’t let the notion of getting “Free Money” entice you into making desperate efforts to get a grant that you have little or no chances of winning. Know your limits.