Federal Grants & Loans for Small Business
It takes more money than expected to cross the threshold beyond which a business starts to bloom. This amount frequently exceeds the amount of personal funds that you may have been able to gather out of your own pockets or from donations from family and friends. The United States government wants entrepreneurs to succeed because successful businesses create jobs. For illustration, $651 million in federal grants reached small businesses in 2009. And more than $660 million in federal loans are distributed each year.
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Small Business Innovation Research Funding
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If your company represents a for-profit organization of 500 employees or less, you may qualify for the Small Business Innovation Research (SBIR) grants that range from $150,000 in a first engagement and reach $1 million in a second handshake. Your company needs to be at least 51-percent American owned. This National Institute of Health support gives the funds to teams that try to make practical the research concepts that they developed. Applicants had a success rate of 22 percent in 2009.
Federal Research Grants
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Small businesses benefit from exploring federal funding directly distributed by U.S. government departments. If your company's mission lines up with some of the objectives of one of the government's departments, you may receive money from an annual grant budget that exceeds $1 billion each year. The National Institute of Health maintains a website that categorizes all the departmental links with grant opportunities. Entrepreneurs could receive from hundreds of thousand dollars to several million. The success rate ranges between 15 and 30 percent.
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Small Business Administration Loans
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The Small Business Administration (SBA) was started in 1953 to aid and protect the interests of small businesses. This independent agency of the federal government focuses on lining up financial lenders and matching them to small businesses. Entrepreneurs need to develop an application that convinces a lender to loan the funds. At times, the SBA can guarantee up to 85 percent of the loan. Loans vary between $250,000 and $2 million. Interest rates vary with the amount and terms.
Economic Recovery Loans
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The federal government extends loans up to $35,000 under the SBA's America's Recovery Capital Loan Program. These funds are meant to provide short-term relief to small businesses in immediate financial hardship. The program accepts only one loan per company. As of June 2010, this program has an expiration date of September 30, 2010.
Special Audiences Opportunities
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Women, veterans, Native Americans and young entrepreneurs receive additional attention from the SBA. For instance, military personnel who were running a business but had to leave while on military duty can apply for loans up to $2 million to recover from the problems that the absence created. Interest rates are four percent and loan terms are up to 30 years.
Strategy
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Grant funding represents money that does need to be repaid. A small business may want to consider a strategy that leverages federal grants to minimize the number of financial strings attached to the company's forward profitability. In planning a fund-raiser initiative through federal grants and loans, you may want to keep in mind the 20-percent success rate that an entrepreneur typically experiences with grants and identify five times more grants than the ones you would normally need. This approach will increase the chances that your financial objectives will be reached.
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