There are various ways to finance your small business. And you need every dollar you can get to fund growth and create a sustainable operation. Even so, one source of funds often goes unexplored: grants.

This funding source provides many benefits compared to alternative forms of financing, like loans and equity sales. However, they also come with drawbacks. Understanding the pros and cons of this alternative will help you decide whether to pursue grants.

At the same time, you'll need to learn the basics of how grants work and where to find them. This article will give you the background you need to get the most out of all your funding options.

What is a grant?

A grant represents another form of financing you can receive for your business. Unlike a loan, you don't have to repay these funds. Also, you won't need to sell an equity stake in order to receive the cash infusion.

A grant represents another form of financing you can receive for your business. Unlike a loan, you don't have to repay these funds.

With a grant, an organization offers you cash to help fund your business. Many grants are meant to support particular communities. These awards can be offered to certain minorities or to women entrepreneurs, for example.

Meanwhile, other organizations look to support certain business types, like those developing green energy alternatives. Yet another category targets particular geographic areas, providing grants meant to stimulate economic activity in a specific locality.

A diverse group of organizations offers grants:

• Local governments
• State governments
• Federal government
• Non-profit organizations
• Large companies

Examples of small businesses grants in 2022

There are billions of dollars in grant money available. The federal government alone provides more than 1,000 grants totaling upwards of $500 billion a year. Only a portion of these apply to for-profit companies. But that still represents a significant funding source for the right startups.

And the funds available through the U.S. government only represent one potential source of awards. Corporations, non-profits, and state and local authorities also provide their own grant programs. To understand the full breadth of the options available, here are just a handful of individual examples to give you an idea of what's possible:

FedEx Small Business Grant Contest

Package delivery giant FedEx provides three $50,000 grants and seven $20,000 awards to small businesses. In 2021, the winners of the top awards were Browndages, Greentop Gifts, and Trade Street Jam Co.

Warrior Rising

Supporting what it calls "vetrepreneurs," Warrior Rising provides grants for veteran-owned businesses. The organization also provides services to support startups founded by former members of the military. These include its Warrior Academy -- providing courses to help business owners -- and mentoring services.

Federal Government Grants

The U.S. government offers a host of grants through various departments. Each one supports a different type of company, meant to encourage development in areas important to the particular part of the federal bureaucracy. You can find grants from agencies like:

• Department of Education
• Department of Defense
• USDA
• Department of Interior
• Department of Justice
• National Institute of Health
• Department of Energy

You can also apply for grants through the U.S. Small Business Administration. The organization has set up COVID relief programs during the pandemic, as well as awards for tasks like R&D and management/technical assistance.

The Amber Grant

The Amber Grant is offered by WomensNet as a way to promote small businesses founded by women. The organization provides a grant of at least $30,000 each month. WomensNet also offers marketing grants and non-profit grants.

What are the pros and cons of grants?

It's true you don't need to repay the cash received through a grant. However, funding obtained this way is far from free money. As such, you need to consider the potential drawbacks of pursuing these opportunities.

As such, here are the pros and cons of seeking out grants:

Pros:

• Your business will receive additional funding. Any additional financing can support your growing startup.
• Receiving the funds doesn't require that you sell equity. As a result, you don't have to dilute your ownership to get funding.
• You don't have to repay the funds. Unlike with loans, you don't suffer the same obligations and balance-sheet implications.
• Grants can come from various sources at once. Once you learn the process of applying for grants, you can make applications to several sources at once.
• Winning a grant can act as a potential marketing tool. With a grant, you don't just receive the cash. At the same time, you often receive press coverage and exposure for your burgeoning brand.

Cons:

• It takes time and effort to pursue grants. Applications can be time-consuming and require tedious paperwork.
• You'll face stiff competition when you apply. Because each grant gets so many applications, rejection rates are high. As an example, NIH grants come with an acceptance rate of around 20%.
• You likely only qualify for certain grants. Since grants target particular markets or demographics, you'll only be able to apply to a small sliver of the overall ones available.
• Many grants come with requirements. You'll have to comply with the grant stipulations and use the funds in the specific way prescribed.
• Grant sizes are often relatively small. Grants of $5,000 or $10,000 can provide an amazing start to some businesses. However, if you're in a capital-intensive field, these funding sources might not be worth the trouble.

Tips for applying for (and winning) grants

If you’re ready to consider grant applications, you need to know the best way to pursue these funding opportunities. Here are a few tips to consider:

Conduct your research

There are thousands of grants available. That means sifting through a lot of information before you can narrow the field to the ones best suited for your startup. A strong research campaign will let you target the most promising opportunities, leading to the most efficient process possible.

Perfect the basics

Every grant application will ask for certain information. You'll need to describe your company, your mission, your vision, and other qualities that will universally apply to any grant application. Perfect the text of these offerings so you can recycle them for each application.

Get specific

While certain aspects of each grant application will carry over from one to another, other information requests will be highly specific. Don't just blast out copies of the same applications for each grant. Rather, tailor your request to the specific organization and the particular instructions they provide.

Match visions

The organization handing out the grant has a reason for providing the cash. They want to achieve a specific goal by offering the funding. Explain how you fulfill this vision and make the organization providing the money feel the investment furthers their long-term goal.

Find a professional

There are dedicated grant writers that you can contact to improve your chances of winning these funding opportunities. If you don't have experience in this area, consider contacting one of these professionals. They can give you crucial advice and guide your efforts in the most profitable direction.

Jumpstart Your Startup with Grant Money

There are many ways to finance your business. If you need a cash injection, it may be time to apply for a small business grant. These funding sources have significant benefits compared to loans or equity sales.

However, you need to keep in mind some of the challenges that come with a grant-writing strategy. You'll need diligent research and a capable application process. Use the information here to start your journey and find the funding your small business deserves.