Grants can seem like a godsend to small business owners, because you don’t have to pay money.
But finding one can feel as futile as searching for a lost treasure.
“Everyone wants to know: How can I get free money for my business?” Jane Steinfeld, director of job creation and economic development for the National League of Cities, an organization that supports local government officials nationwide. “And my answer is: it’s not that simple.”
That doesn’t mean small business grants aren’t worth pursuing — as long as you manage your expectations. Here are five tips to remember when you need it.
1. Prepare in advance
Grant contest application windows may be short. Prepare in advance so that you are ready to take advantage of good opportunities.
Salt Lake City-based Niche Snowboards has been in business since 2009, but company leaders had never applied for help before learning about FedEx FDX.
Four days before the Small Business Grant Contest application deadline. But they invested time and resources into a strong mission statement and marketing assets like photos and videos — which helped them get everything together on time.
“We had all the building blocks there,” said Anna Van Pelt, creative director at Niche Snowboards. “We had to pull everyone together for this help.”
The company In 2022, he won one of the tournament’s three $50,000 grand prizes. He plans to use the grant to invest more in waste production and marketing.
When reviewing grant applications, FedEx judges look at the company’s website, social media profiles, sustainability efforts and whether it makes a good mentor for other small businesses, said Kelly Martin, who manages the company’s grant program.
“Those are the questions that should have been answered regardless,” Van Pelt said.
See also: Four ways small businesses can prepare for an economic downturn
2. Understand the parameters and requirements
Local governments sometimes offer business grants as part of neighborhood revitalization or economic development programs. Frontage grants and commercial corridor grants, for example, provide funding to help you update things like your storefront and signage.
You may encounter smaller applicant pools in your area than national grant contests. But these can be matching grants, meaning you have to put some money into the project. They may also narrowly target specific streets or census tracts.
Local government business subsidies “have a lot of strings attached,” Steinfeld says. “There is a lot of data. [business owners] They have to because that city has to report how all that money was spent.
RelatedThree options for small business loans
3. Look at the right places
If a government grant isn’t already funding a goal in your business plan, it’s probably not a good idea.
But if someone does, you should make sure you know about it. Sign up for email newsletters, attend networking events and consider working with a local business consultant to find out when these opportunities are available.
“Find your county’s website, find your city’s website, get in touch [the] “Economic development people in your community … or attend community events or government events,” says Raj Tumber, a consultant at SCORE, a Las Vegas-based small business training organization.
Also connect with your local business development organizations. These organizations may organize pitch competitions where business owners try to sell investors on their ideas. Winners may receive financial support or resources such as business training and office space.
Business incubator programs are “the only place I know of” that offer real startup business grants, Steinfeld says.
check out: How entrepreneurs can raise money for a new business—and more than 50 benefits
4. Beware of scams
Beware of organizations that ask you to pay them and promise to offer your business to give away contests. They may be scams.
“Anyone looking for help with a startup business needs to understand that there are a lot of help scams out there,” Tumber says.
For a popular resource, Tumber recommends Grants.gov, a website that lists business grants from the federal government. You’ll also get advice on grant-writing and how to report suspected grant fraud.
5. Turn to other sources of funds
Don’t rely solely on grant funding to propel your business forward. If you’re lucky enough to have help, it can accelerate your progress – but it shouldn’t be the engine.
For example, leaders in the snowboard niche have turned to friends, family and small business loans for startup and expansion funding. They also use a business credit card to cover gaps in cash flow.
Steinfeld also recommends building a relationship with a local bank.
“When they understand what you’re doing and are invested in you as a business owner, they have a lot more flexibility in writing than you might think,” she says.
Getting a business grant is fun. But like many parts of business, it’s far from simple. Niche Snowboards was one of 10 winners out of nearly 18,000 applications.
“[Winning] It really brought us to tears,” Van Pel says. “Because as most small business owners know, financing — and just the nature of small business — is very difficult.”
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Rosalie Murphy writes for NerdWallet. Email: rmurphy@nerdwallet.com
