For small business owners, business grants seem to be the holy grail because they provide cash that you don’t have to repay.
But finding one is as futile as searching for lost treasure.
“Everyone wants to know: How do I get free money for my business?” said Jenn Steinfeld, director of entrepreneurship and economic development for the National Coalition of Cities, an organization that supports local government officials across the country. “And my answer is: it’s not easy.”
That doesn’t mean small business funding isn’t worth pursuing—as long as you manage your expectations. Here are five tips to keep in mind when searching.
1. Prepare in advance
Sponsored competition application windows can be short. Be prepared in advance so you are ready to take advantage of opportunities.
Niche Snowboards in Salt Lake City has been in business since 2009, but company leaders never applied for a grant before learning about FedEx FDX,
Small business funding competition four days before the application deadline. But they’ve invested time and resources in a strong mission statement and marketing assets like photos and videos — which help them pull everything together in a timely manner.
“We have all the blocks there,” says Ana Van Pelt, creative director of Niche Snowboards. “We just need to put it all together to get this grant.”
The company won one of the competition’s three $50,000 grand prizes in 2022. It plans to use the grant to develop an upcycled recycling program for manufacturing waste and to invest more in marketing.
When evaluating grant applications, FedEx’s jury looks at the company’s website, social media profiles, sustainability efforts, and whether the company will be a mentor to other small businesses, says Kelli Martin, who runs the company’s grant program. Say.
“These are the kinds of questions you should be answering anyway,” Van Pelt said.
See also: Four ways small businesses can prepare for a recession
2. Understand the parameters and requirements
Local governments sometimes provide business grants as part of community revitalization or economic development programs. For example, Facade Grants and Commercial Corridor Grants provide funding to help you update things like storefronts and signage.
Your community may have a smaller pool of applicants compared to national grant competitions. But these may be matching grants, which means you have to put some money into the project yourself. They may also only target certain streets or census tracts.
Steinfeld said there were “a lot of strings attached” to local government business grants. “There is a lot of data that [business owners] Will have to give because the city will have to report how all this money is spent. “
related: Three Options for Small Business Loans
3. Find the right place
If government grants don’t fund goals that are already in your business plan, then it may not be a good fit.
But if someone does, you need to make sure you know it. Sign up for the email newsletter, attend networking events, and consider working with a local business mentor to find out when these opportunities are available.
“Determine your county website, identify your city website, and [the] Economic development people in your community…even at community events or government events,” said Raj Tumber, a Las Vegas mentor for SCORE, a small business coaching group.
Also get in touch with your local business development organization. These organizations may host pitch competitions where business owners can try to pitch their ideas to investors. Winners may receive grant funding or in-kind resources such as business mentoring and office space.
Steinfeld said the business incubator program is “the only place I know of that offers real startup business funding.”
Check: How Entrepreneurs Can Raise Funds for a New Business — And the Advantages If You’re Over 50
4. Beware of scams
Beware of organizations that ask you to pay and promise to submit your business to competitions. They may be fraudulent.
“Anyone looking for startup funding has to understand that there are many funding scams,” Tumber said.
For a reputable source of information, Tumber recommends Grants.gov, which lists available business grants from the federal government. You can also find advice on writing grants and how to report suspected grant fraud.
5. Turn to other funding sources too
Don’t rely solely on grants to propel your business forward. If you’re lucky enough to be funded, it can accelerate your growth – but it shouldn’t be the engine.
For example, the leaders of Niche Snowboards turned to friends, family and small business loans for startup and expansion funding. They also use business credit cards to cover shortfalls in cash flow.
Steinfeld also recommends building relationships with local banks.
“They have a lot more flexibility in terms of underwriting than you might think … when they understand what you’re doing and invest in you as a business owner,” she said.
Getting a business grant is exciting. But like many parts of running a business, it’s no mean feat. Niche Snowboards was one of only 10 winners out of nearly 18,000 applications.
“[Winning] It actually brought us to tears,” Van Pelt said. “Because, as most small business owners know, money — and the nature of small businesses — is tight. “
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Rosalie Murphy writes for NerdWallet. Email: rmurphy@nerdwallet.com.