The Nuts and Bolts of Federal Grants: Are They a Fit For Your Business?

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The Nuts and Bolts of Federal Grants: Are They a Fit For Your Business?

Looking for some cash to prop up your company? The US government represents a major source of funding for entrepreneurs, dishing out billions of dollars in grants each year to businesses. Federal grants aren’t necessarily free money and often come with very stringent conditions.

Nevertheless, they can be a valuable source of funding for growing businesses, especially those with significant R&D operations. Here are some facts and pointers to keep in mind should you consider applying for government grants:

Large network of sources

Government agencies tend to favor projects that could lead yield significant benefits for society.

Grants are not limited to any single agency. While the Department of Commerce and Small Business Administration (SBA) are primary sources of funding, most Cabinet-level agencies maintain grant programs. A producer of revolutionary new farming equipment, for example, would be wise to approach the Department of Agriculture. The Department of Defense would likewise finance military-related R&D.

Government agencies tend to favor projects that could lead yield significant benefits for society. As a result, available grants tend to relate to science, technology and R&D. If your company provides socially beneficial products or services, you stand a better chance of receiving funding. and other information resources

The various government agencies and sub-agencies provide online information on currently available grants. Websites for the SBA and Small Business Innovation Research (SBIR) and Small Business Technology Transfer (SBTR) programs are particularly helpful resources.

However, the massive web of sources and institutions can be difficult to navigate. You can streamline your research by checking out, which aggregates information on all available federal grants. By configuring the search settings, you can effectively identify programs that align with your needs and expertise. The vastness of cannot be understated as it contains information on 1000+ grants programs that collectively offer $500 billion in funding.

The application process

You won’t be surprised to learn that federal grant applications require masses of paperwork. The National Health Institute’s (NIH) grant application guidelines, for example, notes that completion of all paperwork takes roughly 22 hours in total. This excludes other bureaucratic procedures like registration of an Employment Identification Number (EIN) and Data Universal Numbering System number (DUNS).

On top of that, you’ll need to put together a pitch explaining your company’s qualifications and how you intend to carry out the project. Applicants should give themselves ample time to complete all relevant procedures; waiting till the last minute could doom your chances of acceptance.

Restrictions and limitations

This is the part no one likes to hear. However, it’s important to note that grants are very limited in their purpose and application. As noted on the SBA’s website, grants are not available for the creation or expansion of a business. A loan or investment in your business would more practically address those needs. As previously noted, grants generally go towards R&D or other projects that yield clear benefits for society.
With that in mind, only certain types of businesses may be eligible for federal grants. Unfortunately, restaurants, hair salons and other small-scale service outlets will find it difficult to acquire funding. Research and tech-oriented small businesses stand the best chance of having their applications accepted.
Finally, grants are not necessarily free handouts as they often come with restrictions and conditions. As per the SBA, many programs require the recipient to match funding or take on a supplementary loan.


Grants are one of many methods through which the government finances small business activities. Loans, in fact, come with many benefits not associated with grants. While application of grant funds tends to be limited in scope, business owners enjoy more freedom in spending income from loans.
The SBA administers a menu of loan programs with varying functions through intermediary lenders. The 504 loan program, for example, offers loans for the purchase of real estate, heavy machinery and other fixed assets. Microloans of up to $50,000 may be also acquired for the expansion of business operations.
These loans offer several advantages depending on the program, including below market interest rates, lengthier repayment periods and looser collateral requirements.

One of many options

Grants can be helpful for certain small businesses and startups. Although often accompanied by many conditions, they do not require repayment of the principle, which is an important advantage. A quick look through may reveal opportunities aligned with your company’s mission and capabilities.
However, entrepreneurs should understand the challenges associated with acquiring grants and consider the benefits of alternative funding techniques.

FG International Associate Writer
Chris is a suburban kid from Connecticut who relocated to Tokyo two years ago. He is currently studying Japanese and giving the "startup thing" a shot.