What is a Government Grant?
A government grant is a financial award given by the federal, state or local government authority for a beneficial project of some sort. It is effectively a gift: It does not include technical assistance or other financial assistance, such as a loan or loan guarantee, an interest rate subsidy, direct appropriation, or revenue sharing. The grantee is not expected to repay the money.
Why Is The Government Giving Away Free Money?
Innovation and ingenuity are important to any society. For any economy to be competitive in the modern world, they must make sure to open up avenues to grow and nurture new businesses. To put it simply, the government gives out grants because it serves the greater good to serve the needs of the people.
How Do You Get Started Working With The Government?
SAM stands for System Award Management.
To do any business with the federal government, you must register your business in the System for Award Management. The government will not hire any type of business that has not registered in the SAM directory.
We have an article on our site, Everything You Need to Know About SAM for Small Businesses, that gives you important information about this process.
As a smart entrepreneur, you have already used our site to register in the SAM directory. Congratulations on taking this important first step to become a government contractor.
Registering With The SAM Directory Also Has Other Important Advantages
You must register with the SAM directory to apply for government grants.
A grant is a way the government funds your ideas and projects to provide public services and stimulate the economy. Grants support critical recovery initiatives, innovative research, and many other programs listed in the Catalog of Federal Domestic Assistance (CFDA).
A grant is different from a loan in that it is money that your business does not have to pay back. So, registering for the SAM directory gives you access to free money!
Are Grants Difficult To Obtain?
In truth, grants can be very competitive. It is important to read instructions so that you can thoroughly understand the application process. You do not want your grant application to be thrown out because you did not provide the correct paperwork or information. A small business should also be aware of deadlines. However, please do not let a challenging application dissuade you from trying to qualify for grants. There is nothing truer than the saying about never making any of the shots you don’t take. Some websites can help you through the process.
What Qualifies As A Small Business?
To be considered a small business, a company has to meet the following requirements:
- A business must meet small business size standards.
- Part of a business must be within the U.S.
- A business must operate mainly within the U.S. or make a significant contribution to the U.S. economy through the payment of taxes or the use of American products, materials, or labor.
- A business must be independently owned and operated.
- A business cannot be dominant in its field on a national basis.
- The first thing a small business must do to qualify for government contracts is to register with the SAM Directory.
Minority-Owned Business Status
Five percent of the Federal government contracts are supposed to be awarded to members of an economically or socially disadvantaged group. This allows minority groups to remain competitive in the government market.
Under the Small Business Act, certain individuals are presumed socially disadvantaged:
- African-Americans
- Hispanic Americans,
- Asian Pacific Americans
- Native Americans (American Indians, Eskimos, Aleuts, or Native Hawaiians)
- Subcontinent Asian Americans.
An individual who is not a member of one of the groups listed can be admitted to the program if he/she shows – through a “preponderance of the evidence” – that he/she is socially disadvantaged. For instance, an individual may show social disadvantage due to race, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society; or other similar causes.
Registering For Minority Certification
To qualify for the five percent of the contracts that are reserved for minority-owned or disadvantaged businesses, one must be certified by the government. This means that a business is giving up on 24 billion dollars worth of revenue by not registering.
Registering also has other advantages. The SBA offers specialized training programs and mentoring to registered organizations, free of charge. You also get admitted to opportunity fairs and networking events through the National Minority Supplier Development Council.
Before applying for the 8(a) Program, each firm is urged to take an online training and self-evaluation course that can be found here at the 8(a) Business Development Suitability Tool.
The first section of the online course explains the 8(a) Program intimately. It culminates in an eligibility self-assessment test. The test consists of a series of straightforward yes/no questions that evaluate the degree to which your firm meets the essential qualifications for the 8(a) Program.
If key eligibility criteria are not met, you will be directed to the SBA resource deemed most appropriate to help you at this time.
When applying for a grant, think about what you are doing for the community.
What are you bringing to the table? Does your business model further the altruistic goals? For example, if you are part of a small community of at least 50,000 people, you could qualify for a Rural Business Development Grant.
Their websites describe this program as a competitive grant designed to support targeted technical assistance, training, and other activities leading to the development or expansion of small and emerging private businesses in rural areas which will employ 50 or fewer new employees and has less than $1 million in gross revenue. Programmatic activities are separated into enterprise or opportunity type grant activities.
Rural public entities including, but are not limited to:
- Towns
- Communities
- State agencies
- Authorities
- Nonprofit corporations
- Institutions of higher education
- Federally-recognized Tribes
- Rural cooperatives (If organized as a private nonprofit corporation)
What happens if I receive a grant?
The good news is that since it is not a loan you do not have to worry about interest rates and financing. However, grants can be very specific about how you use your money so you want to make sure that there is clear communication between you and the government agency about how the money should be spent.