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How Do Business Grants Work?

March 9, 2025

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What Is a Business Grant?

Business grants are money offered by the U.S. government and other organizations to a variety of small business owners or nonprofits.

Corporate and nonprofit grants range from sources such as the Halstead Grant to the National Association for the Self-Employed; The Amber Foundation provides grants for women-run businesses; Operation HOPE is an organization focused on supporting Black-owned businesses, providing a range of funding assistance and programs.

Often, business grants do not require repayment, but securing funding can be competitive and requires applicants to meet certain criteria and adhere to strict requirements.

Key Takeaways

Business grants are money given to small businesses by organizations or governments.
A wide variety of grants are available for small businesses, although securing a grant can be competitive.
Organizations that provide grants for small businesses include the U.S. Small Business Administration (SBA), Grants.gov, the Minority Business Development Agency (MBDA), and the State Trade Expansion Program, and several other nonprofit and academic funding resources.
Many small business grants are not required to be repaid, which provides an attractive source of funds for growing businesses.

How Does a Business Grant Work?

Business grants are not complicated—they are money awarded to businesses deemed worthy of receiving funds by the grantor after an application and review process. They can be paid to a business in any form, such as checks or direct deposits. For example, the North Carolina Department of Revenue mailed checks to businesses awarded grants as part of the Business Recovery Program in 2022.

Applying For a Grant

To apply for a business grant, it’s important to know the steps and criteria for the type of funding for which you are applying. You must ensure that your business meets all of the grant requirements and criteria.

Also, be aware of the time it takes to apply for different grants. They often require a lot of paperwork that details your business’s reasons for applying for the grant, market demographics, or the nature of your product or service. Additional documentation may be required to detail your finances, marketing, or intent for using the funds.

It helps to ensure your financial records are accurate and up-to-date before applying.

Resources

The good news is there are countless resources for funding opportunities, including the following:

Payments and Taxes

While business grants are typically not required to be repaid, they are often taxable. Details on the tax payments on different grants can usually be found in the business grant agreement. The funding organization might provide you with tax information if it is not explicitly stated in the agreement. In addition, the Internal Revenue Service (IRS) and state Department of Revenue websites provide information on tax responsibilities.

Tax deductions may also be available on business grants, which may be worthwhile if they are applicable to your business.

Types of Business Grants

Generally speaking, there are five main types of grants based on their funding source.

Federal Grants

The primary source for federal grants can be found at SimplerGrants.gov. In March 2025, over 2,000 grants were available to small businesses. These include grants issued directly or indirectly to small businesses.

State Grants

U.S. states offer a variety of grants to small businesses. Your local chamber of commerce can be an excellent resource to learn more about these types of grants, which may be industry-focused with the goals of promoting job creation or aligning with economic development.

For instance, Massachusetts Growth Capital Lending Projects provide loans from $5,000 to $2 million for businesses to finance commercial real estate purchases for business purposes.

Municipal Grants

These types of grants can be found at the city or county level. They often don’t require a research component. Small business development centers, such as the San Diego & Imperial Small Business Development Center, provide grants to companies to support job creation and innovation. They also may provide funding for companies looking to expand into international markets.

Corporate Grants

Many companies offer small business grants, such as the FedEx Small Business Grant Contest, which awards $30,000 in funding to companies with fewer than 99 employees; the Venmo Small Business Grant, which provides $10,000 in funding to companies with under $50,000 in annual sales and fewer than 10 employees; and the National Association for the Self-Employed, which awards $4,000 in grants to its members for business development activities.

Nonprofit Organization Grants

Nonprofit organizations and foundations offer grants as well. There are many examples, including the Foundation for a Just Society, which focuses on LGBTQI- and women-run businesses, and the Local Initiatives Support Corporation.

Is It Difficult to Get a Business Grant?

It can be, so it’s important to carefully read the details of the grant requirements. Often, the application will state requirements covering the number of employees, annual revenue, where the business is registered, and grant objectives. Many federal grants require a small business to partner with a nonprofit organization, which is also important to consider, depending on the grant type for which you are applying.

How to Get Free Grant Money?

Grants are usually given to businesses through the Small Business Administration or other organizations after an application and approval process.

What Are the Disadvantages of a Grant?

Competition is very high for grants, making them difficult to receive. Also, the granting agency or organization determines who receives their grant, so you’ll need to research and prepare to ensure you’re more competitive than every other business applying for them.

The Bottom Line

There are thousands of grants available for small businesses to support entrepreneurship, job creation, and a broad spectrum of objectives. This is because small businesses make up 99% of American businesses and thus play a critical role in the economy, driving economic growth and spurring innovation.

These grants are offered by government, nonprofit, and corporate sources, among others. Often, applications can be rigorous and time-intensive, but the payoff can range from thousands to millions. Furthermore, grants often do not have to be repaid.

For business owners looking to access funding, it is worth paying close attention to grant requirements and building connections, whether with your local chamber of commerce or with contacts at state agencies. These can provide key information on grant funding to help your business grow.

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