Many business owners need access to additional funding to continue to grow and develop their ventures. After all, lack of adequate financing is one of the primary reasons that businesses or startups fail within the first few years of operation.
For Black-owned businesses, though, the need for additional funding may be even greater. According to the U.S. Census Bureau’s 2020 Annual Business Survey, there were an estimated 134,567 Black- or African American-owned businesses with 1.3 million employees. However, during the onset of the pandemic in early 2020, the National Bureau of Economic Research found that Black-owned businesses were hit the hardest among minorities, experiencing a 41% decline from just February to April of that year.
- Black entrepreneurs can use small business grants to fund a business project or to expand their businesses.
- Unlike loans, grants do not need to be repaid. However, grant recipients will need to share their progress with the awarding organization.
- Small business grants are often awarded by nonprofit organizations with funding from government agencies such as the Small Business Administration.
- Organizations and corporations supplying grants will establish qualifications for their applicants.
The Option of Grants
While many business owners use loans and lines of credit to support their business launch or growth, this is not always an option for some. In fact, according to a 2021 Federal Reserve small business survey, 30% of Black business owners cite access to credit as their main financial challenge (compared to just 12% of white business owners).
If these traditional types of financing options are limited, a viable alternative could be grants, which are funds awarded by nonprofit organizations or corporations to small businesses. The biggest caveat of grants is that they do not need to be repaid, like loans or lines of credit. However, the application process for grants can be lengthy and recipients will be required to share their results with grant providers.
“Shoot your shot,” said Shante Roddy, owner of entrepreneur-focused, grant-providing organization She Boss Talk, in a video call with The Balance. “You have to go in like you’re the best of the best and that you’re gonna get this money. Be active and don’t take a passive approach.”
Types of Grants
Black business owners have several options when it comes to receiving grants. Here is just a selection below.
Amazon's Black Business Accelerator
Amazon's Black Business Accelerator is a grant program established specifically to grow and advance equity for Black-owned businesses. The program offers financial assistance (such as funds for credit, sponsored products, and image servicing), business education and mentorship, and marketing and promotional support.
NASE Growth Grants Program
If you are self-employed and a member of the National Association for the Self-Employed (NASE), you may be eligible to participate in the organization’s Growth Grants program, which offers microgrants. The purpose of these grants is to help self-employed business owners grow their businesses. Business owners can receive up to $4,000 in microgrants, which can be used to develop marketing materials, hire employees or contractors, and even purchase equipment.
While grant applications are offered monthly, they are reviewed and awarded on a quarterly basis.
Community Foundation Public Awareness Foundation Initiative Grant Resource List
The Community Foundation Public Awareness Foundation Initiative does not provide grants directly. However, the organization shares an extensive list of grants for entrepreneurs by state. Many of these grants and funding sources are offered to support minority-owned businesses.
Small Business Administration Grants
The Small Business Administration (SBA) provides most of its funding directly to community organizations and educational institutions to support entrepreneurs in need of business development support and counseling. However, the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs can be applied directly by small business owners. Both of these grants are focused on scientific research and development with the purpose of commercialization.
Prepare Your Business To Apply for Grants
The process for applying to small business grant programs will vary but there are some steps that every business owner should take to be prepared for the application process.
“Demonstrate that you are serious about your business,” Roddy said. “Be willing to be transparent and share information that is going to verify or validate that they are a full-fledged, operating business.”
Before you begin researching grants, you should have the following materials established for your business.
Depending on the grant application, your business plan can be brief or lengthy. However, the most essential purpose of the plan is to show that your business is positioned for growth, and having access to grant funding will support its development.
If you are running an active business, it should have an established structure and be registered with the state. Whether you operate your business as an S corporation, LLC or sole proprietorship is your choice. However, having an established business structure is necessary.
Having your tax returns and banking and accounting records organized will also show grant-providing organizations that you are operating an active, financially healthy business. Being able to properly track and analyze income and expenses is also essential to many grant application processes--they want to award business owners who have a strong understanding of their finances.
Always keep your financial records in order so that applying for grants is seamless.
Does your business have a website? How often are you publishing content on social media? For organizations awarding grants, it is important to show that you are actively marketing your value to your target audience. This shows a granter that an entrepreneur is engaged in sales and ready for additional growth in their business.
How To Apply for Small Business Grants
Once you have prepared your business to apply for grants, it’s time to take the next steps.
Identify a Project or Need Within Your Business
Many grants are awarded to businesses that can show a distinct need. They need to show how their business will be able to either continue to be in existence or grow as a result of being awarded the grant.
One of the easiest ways to find out about grants is networking with other entrepreneurs and organizations.
“Stay connected to your networks,” said Roddy. “Don’t isolate yourself because there are people advocating for you.”
Once you have identified grants for your business, it is time to begin the application process. Prepare your grant application and have a trusted friend or fellow entrepreneur review before you submit. Pay attention to deadlines--you don’t want to apply at the last minute.
When applying for grants, consistently check your email--especially your spam folder--for correspondence. If you do not respond to a grant award in a timely fashion, you can lose out on money.
Frequently Asked Questions (FAQs)
How soon after approval will small business grants be paid?
Small business grants are awarded and paid at varying times, whether it be monthly, quarterly, or annually. Consult with the grant organization to determine how grant funding is disseminated to recipients.
What qualifies as a “small business” when it comes to grants?
According to the SBA, a small business is typically defined by the amount of revenue generated in a fiscal year and the number of employees it has. For various grants, the term “small business” will be defined by the awarding organization.
How much does it cost to apply for small business grants?
While some grants do carry application fees, most do not as they are often run by nonprofit organizations or larger corporations. According to Roddy, any grant application fee that costs more than $25 should be considered a red flag.