Updated: Jul 20
There's a misconception in the small business world and we get asked about it a lot. Somehow word has spread that the government or other entities are waiting to fund small businesses with grants and all you have to do is apply. There are "grant writers" across the internet that will make you big promises about the thousands of dollars you can get to launch your start-up or fund your existing for-profit business. I've even seen some that promise individuals similar grants to help buy a house. To be frank, it's just not true.
In short, grants are available to nonprofit organizations. It's easy to confuse all the terminology related to businesses, so learning the differences before starting a business is important. Due to their philanthropic nature, grants from foundations are almost exclusively available to organizations registered with the IRS as a 501(c)(3) nonprofit organization. A nonprofit organization is one that's mission is exclusively charitable and any revenue is put directly back into supporting that mission. But that is very different from re-investing in your business to help it grow. The IRS defines "charitable" as
"The exempt purposes set forth in Internal Revenue Code section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the prevention of cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency."
Private foundations are required by law to award 5% of their assets annually to public charities in the form of grants or other operating charitable purposes in order to maintain their status as tax-exempt. To learn more about the differences between foundations and charities, click here.
What funds are available for for-profit businesses?
For-profit businesses should work with their bank to learn more about loans available to small businesses including the U.S. Small Business Administration. The SBA itself does not make loans, however it does help small businesses get loans through approved partnering lenders, community development organizations, and micro-lending institutions to reduce the risk for small business owners. These loans may include funds available for COVID relief, women-owned and/or minority-owned businesses.
Buyer Beware: Like the people that promise grants for for-profit businesses, there are lots of shady "lending" companies out there. That's why we recommend working with your bank to ensure you make the best decision for the future of your business.
Is your nonprofit looking for help with grant writing? Just Write Grants can be your nonprofit's virtual grant writer, providing high-quality proposals, research, and submissions based on more than a decade of experience and multiple millions of dollars of grant funds secured. To schedule a call with one of our expert grant writers (and get 30 minutes of free grant research), click here or call 1-866-7GRANTS.