Raising Capital

Government Grants for Small Businesses? You bet.

Amy Cortese | February 6, 2015

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Ron Flavin is a San Francisco-based growth and funding strategist and the author of Business Grants: Everything You Need to Know to Connect with Local, State and Federal Grants for Business. Just 5% of federal grant funding goes to for profit businesses—and most of that is earmarked for research & development related to technology, energy, healthcare and other areas. Still, grant programs, particularly at the sate and local level,  may be a good fit for certain small businesses. “If your business activities are aligned to particular governmental interests, then you ought to consider government grants as a source of capital,” says Flavin. We talked to him about this often overlooked source of capital.

Amy Cortese:  Technology aside, what are the most promising grant sources for small- and mid-sized local businesses?

Gov-Grants

Ron Flavin: State and local governments offer some of the most promising grants for small- and mid-sized local companies. If you’re fortunate enough to be in an area where the state or local governments offers business grants, then I recommend starting there.  Local and state business grants tend to be somewhat more accessible and offer a bit more flexibility than federal grants.

AC: Can you give some examples?

RF:  New York is a great example. The State of New York and New York City both offer programs that support a broad range of businesses. These programs offer grants to businesses in specific sectors or businesses of any type, provided they create jobs and locate in targeted economically distressed areas. (For examples, see: http://www.esd.ny.gov/BusinessPrograms.html)

There’s also a New Farmers Grant Fund that provides assistance to new and early stage farmers as a way of encouraging agribusiness in the state. And Economic Development Purpose Grants are open to a wide range of businesses and organizations whose work can help create and retain jobs and stimulate the local economy.

At the city level, a good example is the Fashion Manufacturing Initiative, a $3 million program between the city and the Council of Fashion Designers of America to support local fashion manufacturing.

For a state-by-state list of grant programs, see http://rflavin.com/blog/state-state-guide-business-grants-2015/

AC: But this is not free money, right? What kind of requirements do small business grants come with?

RF: Unlike a loan, grant funds do not have to be paid back. And for small businesses trying to raise capital, grants are ideal because they do not dilute ownership.  However, there’s a false perception that government grants for businesses are a ‘pot of free money’ waiting to be had. Unfortunately, perception is not reality. Government grants always come with a great deal of strings attached and strict requirements that must be met. The agencies that manage grants need to be sure that you spend the money on the things you said you were going to spend it on to achieve the objectives you said you were going to achieve in your proposal. Otherwise, the money must be returned or even worse, the recipient could actually face criminal charges for misuse of public funds.

AC: You’ve worked with a lot of companies on getting grants – give us a couple of examples:

RF: I’ve worked with companies of all sizes.  For example, I helped a small Los Angeles-based startup to secure a $1 million grant to demonstrate their innovative renewable energy technology. I also helped a startup win a $9 million grant to commercialize a high-tech, innovative data server.

On the other end, I’m currently working with a small New York City-based furniture maker, finalizing a grant to help it to increase local jobs and foster economic revitalization in an economically challenged neighborhood.  I’ve also helped a a small, non-tech firm in Beaumont, Texas to secure a grant to move her business to a larger location, and have worked with a business that provides tutoring services for students struggling in school.

“Not following instructions is the No. 1 mistake I see in grant proposals” 

AC: What are your tips for securing a small business grant?

RF: The most important tip would be to spend time researching to understand the true nature of business grants. There is a lot of misinformation being spread about business grants so it’s important that business owners be able to separate fact from fiction. Next, if you find a potential grant opportunity that seems right for you, read the guidelines and requirements to be sure you fully understand them. In particular, pay attention to eligible- and non-eligible uses of funds, timeframes, performance requirements and reporting and compliance mandates.

Lastly, when preparing your grant proposal, be sure to follow the instructions and provide the exact information requested. I work as a professional proposal reviewer for a number of state and federal funding agencies, and not following the instructions is the number one mistake I see in business grant proposals. Hiring an experienced grant professional can give your proposal an important edge in winning grant funds.

AC: Any changes or developments in grant programs for 2015? Or predictions?

RF: Looking forward, I see government funders at all levels taking a closer look at the performance of their grant programs to better understand the cost-benefit of their investments. It’s likely that this will result in scaling back or elimination of grant programs that do not have strong, quantifiable returns.  I  don’t expect to see much change in the focus of government business grants, with the emphasis continuing to be on technologies (particularly clean technologies), energy, job creation and economic development.

Lear more about grant funding at www.rflavin.com.

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