Federal Government Grants for Small Business: What You Need to Know

When it comes to financing a startup, government grants for small businesses aren’t the first thing most founders look toward. And they shouldn’t be. While it’s great to get “free money” if you can, federal grants are only available for specific fields and specific uses — and they’re not easy to get.

However, if your startup does qualify for a government grant for small business, then they’re potentially a great source of funding that you don’t have to pay back.

But unlike other industries, startups have another source of funding that we don’t have to pay back, at least immediately: Venture Capital.

Venture capital is also hard to acquire and certainly comes with stipulations — including giving up equity in your startup — but it’s usually a lot more money than a federal grant and is less restrictive about usage. And the paying back part only happens if your startup is a success. So it might be worth checking out venture capital first before going this route.

However, if you’re still interested in a government grant for small businesses — and it’s definitely potentially a great option for a subset of startups — check these out:

1. Research and Development (R&D) federal grants

There are two umbrella programs under which R&D federal grants fall: SBIR and STTR.

Federal agencies allocate a certain percentage of their budget to these grants.

a. Small Business Innovation Research Program (SBIR)

The SBIR is focused on technological innovation. Specifically, it’s for companies that are interested in Federal Research/Research and Development (R/R&D) that has the potential for commercialization.

Learn more about SBIR.

b. Small Business Technology Transfer Program (STTR)

The STTR has the same requirements as the SBIR, with the added requirement that applicants collaborate with a research institution.

Learn more about STTR.

The SBIR and STTR Programs are structured in three phases:

1. Phase I: Phase I is about determining whether or not a proposed R&D project is technically worth it, feasible, and has commercial potential. They’re also looking to  determine the quality of performance of your startup before providing further Federal support in Phase II. SBIR Phase I awards normally do not exceed $150,000 total costs for six months.
2. Phase II: Phase II is about continuing the R/R&D efforts started in Phase I. Funding is based on the results achieved in Phase I and the scientific and technical merit and commercial potential of the project proposed in Phase II. Only Phase I awardees are eligible for a Phase II award. SBIR Phase II awards normally do not exceed $1,000,000 total costs for two years.
3. Phase III: Phase III is about bringing the product to market, if that’s applicable. The SBIR program does not fund Phase III. Some federal agencies, Phase III may involve follow-on non-SBIR funded R&D or production contracts for products, processes or services intended for use by the U.S. Government.

c. Federal agencies that participate in the SBIR and STTR programs

Department of Agriculture (USDA)

There aren’t too many startups in agriculture, but for those of you who are, the Department of Agriculture has grants for you! They’re especially looking for companies that “support high quality research related to important scientific problems and opportunities in agriculture that could lead to significant public benefits.”

Learn more here.

Department of Defense (DoD)

If you’re conducting R&D and developing technology that’s specifically for the  Army, Navy, or Air Force, you may qualify for a DoD grant. You know who you are.

Learn more here.

Department of Education (ED)

Educational startups should take a look at the grants listed under the Department of Education’s National Center for Education Research. Anything related to classroom work and technology as well as education-focused research may qualify.

Learn more here.

Department of Energy (DoE)

The Department of Energy focuses on current energy sources and energy development nationwide. They recommend anyone interested in a grant from their Office of Science watch this one hour webinar that gives an overview of the grants available.

Learn more here.

Department of Transportation (DOT)

The Department of Transportation’s Volpe Center handles grant applications. They award grants for R&D focusing on railroads, aviation, and highways. (We see you, model train lovers.) You can sign up here to find out when the next Department of Transportation solicitation is open.

Learn more here.

Environmental Protection Agency (EPA)

If your startup is focused on green tech or another sustainable scientific development, then the Environmental Protection Agency (EPA) grants may be for you. This is for startup founders who believe that technology may the answer to our environmental problems.

Learn more here.

Department of Homeland Security (DHS)

The Department of Homeland Security is looking to award grants to startups focusing on topics relevant to the following Science and Technology Directorate organizations: Borders and Maritime Security, Chemical/Biological Defense, Cyber Security, Explosives, and the First Responder Group. Not sure this is a super popular area for startups, so if you see yours there, definitely apply.

Learn more here.

National Aeronautics and Space Administration (NASA)

NASA is looking for startups that focus on energy efficiency, alternative energy, and renewable energy. But, of course NASA needs a lot of different types of tech, so check them out! (Also, who doesn’t want to do stuff that’s space-related? Watch out, Elon!)

Learn more here.

National Institute of Health (NIH)

Biomedical startups should check out the options for small business grants that the National Institute of Health offers.  Figured out a new way to help diabetics test their sugar? Working on mapping the gut microbiome in order to improve people’s health? Then this one may be for you.

Learn more here.

National Science Foundation (NSF)

The National Science Foundation is interested in startups that focus on engineering or science, with specific topics changing year-to-year. It’s like a grown-up science fair, with way better prizes. (But, please, no baking soda volcanos.)

Learn more on their YouTube channel.

National Institute of Standards and Technology (NIST)

The National Institute of Standards and Technology’s SBIR program solicits R&D proposals from small businesses that respond to specific technical needs, which relate to different topics each year.

Learn more here.

2. Other Federal Grant Programs

a. The Federal State Technology Partnership (FAST) Program

FAST currently provides $3 million in total funding (up to $125,000 per applicant) for outreach, financial support, and technical assistance to next generation research and development (R&D) focused small businesses.

They’re especially interested in women, socially/economically disadvantaged individuals, and applicants from underrepresented or rural areas who are competing in the SBIR and STTR programs.

b. Program for Investment in Microentrepreneurs (PRIME)

PRIME is an SBA partner program that offers minimum grants of $50k and maximum grants of $250k to low-income entrepreneurs who lack sufficient training and education to gain access to capital to establish and expand their small businesses.

They offer technical assistance grants, capacity building grants, research and development grants, and discretionary grants.

c. SBA’s State Trade Expansion Program (STEP)

STEP is all about helping export businesses improve and expand. This program provides financial awards to state and territory governments that they then use to help small businesses with export development.

Small businesses interested in a STEP grant work directly with the state entities that receive STEP awards.

3. Database for finding specific federal grants for small business

In addition to agency-specific government grants for small businesses, there are grants available that are much, much more specific.

Your best bet for finding a grant that matches your startup closely is to search the Grants.gov database to find out what’s currently available and what most closely matches your startup.

You should also check back periodically, as government grants for small businesses end and are added frequently.

Here’s how to apply for a federal grant for small business on Grants.gov

Grants.gov has a clear process for learning about and applying for federal grants for small businesses:

1. Learn about grants
2. Check eligibility
3. Search grants
4. Register
5. Apply for a grant
6. Track your application

You can click on each term to be brought to the relevant, but here’s a quick overview of each step:

Step #1: Learn about grants

The Learn page includes a video explaining how Grants.gov works, a community blog to help guide potential grantees, and a series of topics about government grants, including “Grants 101” and “Grant Policies,” among others.

Step #2: Check eligibility

The Check eligibility page is really important — don’t skip this one! This site helps you figure out whether or not your startup is even eligible to apply for a federal grant. They list some general requirements and also point you toward other resources to determine whether or not your startup is eligible.

Step #3: Search grants

Searching grants is probably pretty self-explanatory. It’s where you search for grants! You can search by keywords, opportunity number, or CFDA, as well as more specific criteria.

Step #4: Register

Once you’ve learned about the grants, checked your eligibility, and searched for the right fit, you have to register yourself and your company. The Register page includes links for registration, as well as links out for more information about the process, and an explanatory video.

Step #5: Apply for a grant

And now, finally, it’s time to apply! The Apply for a grant page includes instructions on how to use Workspace, which is the system that grants.gov uses to manage applications. It also gives various options for the type of application you’re going to fill out, depending on the level of complexity and sophistication your company is at.

Step #6: Track your application

Just like an order from Amazon, you can track the status of your grant submission. The Track your application page asks for tracking numbers to locate your submission and give you all the info you need to know about where in the process your application is.

4. State-level small business grants

In addition to federal small business grants, states also offer small business grants.

State grants are even more specific than federal grants, and they provide less funding. They also work in conjunction with federal and other state grants and many are matching grants, which means you’re required to meet the amount of money they give you.

But a big pro is that fewer people are applying for state grants than for federal small business grants, so if you find one that’s a good fit, it could be a good deal.

a. State-specific small business grants

You can search for state small business grants in your state on any major search engine. See this example search for “ohio small business grants.”

Try a similar search in your state to see what shows up: “[your state] small business grants.”

b. The Office of Economic Development (EDA)

You can also turn to the local EDA in your area. These offices are run by the Economic Development Administration and they offer small businesses help with grants, technical assistance, and other resources to help them grow.

EDA grants are changing all the time so check in here for information about what’s currently available.

Find your local EDA resources here.

c. Small Business Development Centers (SBDC)

The SBA also runs Small Business Development Centers (SBDC) across the country. They’re often hosted by top universities state economic development agencies, which share the cost with the SBA.

They offer free business consulting and low-cost training services including:

• Business plan development
• Manufacturing assistance
• Financial packaging and lending assistance
• Exporting and importing support
• Disaster recovery assistance
• Procurement and contracting aid
• Market research help
• 8(a) program support
• Healthcare guidance

You can find the SBDC in your state here.

Other financing options

If you’re looking for other ways to raise money for your startup, don’t miss our other guides:

• Venture Capital & Series Seed Funding: A, B, C, D, E
• Crowdfunding
• Small Business Loans
• Small Business Grants
• Private Investors
• Angel Investors
• Stay tuned for future guides!