Federal & State Grants Every Entrepreneur Should Know About
Every entrepreneur faces the challenge of securing funding to start or grow their business. Grants – funds you don’t have to repay – are an attractive option for both new startups and established small businesses.
The U.S. federal government and state governments offer various grant programs to support entrepreneurs across industries. These fundings can fuel innovation, job creation, and community development without adding debt or giving up equity.
However, grants are competitive and often come with specific requirements, so it’s important to understand how they work and how to approach them.
Government grants are essentially “free” funding for your business that you do not need to pay back. Unlike loans or investments, funding are non-dilutive – you keep full ownership of your company and incur no debt.
However, they are usually awarded for a public purpose, not just handed out to any business. The SBA even notes it “does not provide fundings for starting and expanding a business”.
Most grants target specific activities (like R&D or exporting) or fund organizations that assist entrepreneurs, rather than providing unrestricted money to individual businesses.
Governments use grants to invest in outcomes they care about – such as advancing technology, revitalizing communities, or supporting certain groups. As an entrepreneur, if your work aligns with those priorities, you are more likely to find grant support.
Not all government grant money flows directly to business owners. Often, federal funds go to state and local agencies, nonprofits, or universities, which then use those funds to support small businesses in their communities.
For example, a federal grant might fund a state-run small business program that offers training or mini-grants to local entrepreneurs. This means you should look at state and local opportunities in addition to federal programs.
Every state has agencies or offices that list current business grants and assistance (for instance, Virginia’s state website lists grants offered by various state agencies).
Finally, remember that fundings come with responsibilities. Accepting “free” money from the government involves paperwork and compliance.
If you win a grant, you must follow all the rules on how the money is used and report your results. Grants can be a fantastic boost for your business, but you need to put in the effort and meet all requirements.
Federal Grants for Entrepreneurs and Small Businesses
The federal government offers many grant programs aimed at helping U.S. small businesses. A great starting point is Grants.gov, the official online portal for government grants.
Grants.gov has a comprehensive database of funding opportunities – literally thousands of grants across all federal agencies, with programs for companies of almost every background.
You can search by category, agency, or keywords to find grants that may fit your business. Below are some of the most significant federal grant programs and resources every entrepreneur should know about.
Small Business Innovation Research (SBIR) Program
One of the best-known federal grant programs for entrepreneurs is the Small Business Innovation Research (SBIR) program. SBIR (along with its sister program, STTR) is nicknamed “America’s Seed Fund” because it provides non-dilutive capital to high-potential small businesses for developing and commercializing new technologies.
Through SBIR, 11 federal agencies (NASA, NSF, NIH, DoD, USDA, etc.) award competitive grants to small companies working on innovations that align with federal R&D needs.
SBIR funding is disbursed in phases: a Phase I grant (often up to ~$250,000) to test an idea’s feasibility, and a Phase II grant (over $1 million) to develop a working prototype or service.
In 2021 alone, the SBIR/STTR programs made nearly 7,000 awards totaling about $4 billion to more than 4,000 small firms across all 50 states – showing how impactful this funding source is for startups.
To qualify for SBIR funding, your business must be a U.S.-based for-profit with under 500 employees and majority U.S. ownership. Your project should have strong technical merit and commercial potential in an area of interest to a federal agency.
SBIR is geared toward high-risk, high-reward ventures – think startups in software, biotech, clean energy, aerospace, and other research-driven fields. The application process involves submitting a detailed proposal to a relevant agency solicitation.
It’s competitive, but an SBIR grant can essentially bankroll your R&D without taking any equity or requiring repayment, allowing you to innovate on your own terms with government support.
Small Business Technology Transfer (STTR) Program
The Small Business Technology Transfer (STTR) program is closely related to SBIR. STTR also funds innovative R&D by small companies, but it requires a formal collaboration with a nonprofit research institution (such as a university or federal lab).
STTR facilitates the transfer of technology from research labs to the marketplace by pairing small firms with research partners. It offers similar phased awards as SBIR, with comparable funding amounts.
(Note: Eleven federal agencies participate in SBIR, but only five participate in STTR, so STTR opportunities are more limited.)
If you have – or can form – a partnership with a university or research institute, STTR is an opportunity to obtain significant grant funding (often hundreds of thousands of dollars) while leveraging academic expertise.
Like SBIR, these funds are grants (not loans), so you don’t have to repay them or give up ownership.
State Trade Expansion Program (STEP)
The State Trade Expansion Program (STEP) is a federal-state partnership that helps small businesses enter overseas markets. Administered by the SBA, STEP provides grants to U.S. states and territories, which then use the funds to assist local companies in exporting.
In practice, you can apply through your state’s trade office or economic development agency for help with export-related expenses. STEP grants often reimburse costs like foreign trade show fees, translation of marketing materials, or international travel.
Each state has its own application process and criteria to use STEP funds. Generally, you must be a qualifying small business (meeting SBA size standards) with a product or service that has export potential. The STEP program effectively lowers the barrier to going global by offsetting some of the costs of finding customers abroad.
USDA Rural Business Grants
Entrepreneurs in rural areas should be aware of grant programs offered by the U.S. Department of Agriculture (USDA). The USDA’s Rural Development division runs several initiatives to spur rural economic growth by providing grants and low-interest loans to projects in rural communities.
A key program is the Rural Business Development Grant (RBDG), which funds projects that benefit small businesses in towns with populations generally under 50,000.
RBDG grants can be used for purposes such as training, technical assistance, equipment purchases, or developing facilities. Grant amounts vary, but typically are in the five-figure range (often under $50,000) and do not require a match.
Other USDA programs include Value-Added Producer Grants (for agricultural producers) and various rural innovation funds.
The goal is to create jobs and support business expansion in America’s rural communities by improving access to capital and expertise. If your business is in a rural area, exploring USDA grants and loans could uncover valuable support.
Minority Business Development Agency (MBDA) Grants
Many government grant programs aim to promote inclusion and support entrepreneurs from underrepresented communities. The Minority Business Development Agency (MBDA), part of the Department of Commerce, offers various initiatives to spur growth among minority-owned businesses.
MBDA periodically runs competitive grant programs and funds projects through its nationwide network of MBDA Business Centers.
For example, MBDA has funded business incubators and innovation hubs focused on minority entrepreneurs, and it launches grant competitions for specific purposes (like advancing minority enterprises in manufacturing or helping women of color entrepreneurs).
These grants often go to organizations or partnerships rather than directly to individual companies, but they result in more resources and opportunities for minority business owners – such as training programs, consulting services, or even sub-grants.
Minority entrepreneurs should check MBDA.gov for current grant announcements and leverage their local MBDA Business Center for guidance.
Additionally, other federal efforts – such as SBA programs for veteran-owned and women-owned small businesses – can include grants or special access to contracts and financing that benefit those businesses.
Economic Development and Other Federal Funding Programs
Beyond the major programs above, there are additional federal funding avenues to know:
- Economic Development Administration (EDA) Grants: The EDA (part of the Commerce Department) provides grants for projects that spur regional economic growth and job creation.
These often fund infrastructure, innovation centers, workforce training programs, etc., usually awarded to local governments or nonprofits.
Small businesses benefit indirectly through improved local resources, or you might partner on such a project in your area. - Community Development Financial Institutions (CDFI) Fund: A U.S. Treasury program that supports lenders serving low-income communities.
While it doesn’t give money directly to businesses, it strengthens local CDFI lenders (like community loan funds and certain banks) that in turn provide more loans and micro-grants to entrepreneurs in underserved areas. - Work Opportunity Tax Credit (WOTC): A federal tax credit for hiring individuals from certain target groups (e.g. veterans, long-term unemployed).
It can reduce your tax bill by up to several thousand dollars per eligible hire, effectively giving your business extra funds that you can reinvest.
Table: Key Federal Grant Programs for U.S. Entrepreneurs
| Program | Level / Agency | Purpose / Focus | Typical Funding |
|---|---|---|---|
| Small Business Innovation Research (SBIR) | Federal (multiple agencies, SBA oversight) | R&D grants for innovative small businesses (tech, science, etc.) | Phase I up to ~$250K; Phase II ~$750K–$1M+ (equity-free funding) |
| Small Business Technology Transfer (STTR) | Federal (multiple agencies, SBA oversight) | Similar to SBIR; requires a partner research institution for project | Phase I/II awards similar to SBIR (no repayment required) |
| State Trade Expansion Program (STEP) | Federal–State (SBA to states) | Helps small businesses expand into export markets (via state grants) | Varies by state (e.g. reimbursements for trade show costs, marketing, etc.) |
| USDA Rural Business Grants (RBDG) | Federal (USDA Rural Development) | Supports business development in rural areas (towns <50k population) | Typically $10K–$50K per grant (no match required) |
| MBDA Grants & Centers | Federal (Minority Business Dev. Agency) | Funds projects and business centers that support minority-owned businesses | Varies – often five- or six-figure grants to organizations |
| EDA Grants | Federal (Economic Dev. Admin.) | Funds regional economic development projects (infrastructure, innovation hubs, etc.) | Varies by project; often large grants to local entities |
State and Local Grants for Entrepreneurs
In addition to federal programs, state governments offer their own grants and incentives for small businesses. Be sure to check your state’s economic development agency or small business office for local funding opportunities.
Many states publish lists of grants – for example, grants for opening a new facility, renovating a storefront, or investing in certain industries. Below are a few examples of state-level grant programs that show the range of options:
- Illinois Infrastructure Grants: In 2020, Illinois set aside about $3 billion for capital grants to support local infrastructure projects that benefit communities and businesses.
These grants fund public works (like transportation improvements or facility upgrades) that spur economic growth. They don’t directly give money to individual businesses, but they improve the business environment in those areas. - Minnesota Emerging Entrepreneur Program: Minnesota’s Emerging Entrepreneur Loan Program (ELP) provides state grant funds to nonprofit lenders, who then offer affordable loans to minority, low-income, women, and veteran-owned startups.
This approach helps underrepresented entrepreneurs access capital, with the aim of creating jobs and boosting economic growth in disadvantaged communities. - Texas Enterprise Fund (TEF): The Texas Enterprise Fund is a “deal-closing” grant program to attract companies that will create jobs in Texas.
It offers large cash grants (sometimes millions of dollars) to businesses that commit to significant job creation and investment in the state. Companies must meet strict criteria, and TEF funds are only disbursed if the agreed-upon job and investment targets are met. - San Francisco Small Business Accessibility Grant: On the city level, San Francisco offers up to $10,000 for small businesses to make accessibility improvements (ADA compliance updates such as wheelchair ramps or restroom upgrades).
Eligible businesses can apply and get a decision in about 15 days, helping them fund changes that make their storefronts more accessible to all customers. - State SBIR Matching Funds: More than 20 states offer programs to match federal SBIR/STTR awards won by companies in their state.
For example, a state might provide an extra $50,000–$100,000 on top of an SBIR Phase I grant. These matching grants show a state’s commitment to keeping innovative startups thriving locally by amplifying the federal support.
In recent years, the federal government also launched the State Small Business Credit Initiative (SSBCI) – a $10 billion program that provides funding to states to expand small-business loan and investment programs.
While not a grant to individual businesses, SSBCI gives states more resources to support entrepreneurs (especially in underserved communities) through loans, venture capital, and other financing.
In summary, always research what your state and local authorities offer – from general small business grant programs to very specific niche funds. Your local SBDC or state economic development office can be a great resource to find current programs.
Even a modest grant (a few thousand dollars) can help with equipment or marketing costs, while larger state programs might support major expansions or new hiring.
Tips for Applying to Business Grants
Successfully obtaining a grant requires strategy and attention to detail. Follow these tips to improve your chances:
- Research opportunities thoroughly: Seek grants that align with your business mission, industry, or needs. Use official sources like Grants.gov for federal grants and your state’s website for local grants.
Set up email alerts or check often so you don’t miss deadlines. Local business support groups (SBDCs, chambers of commerce, etc.) may also know about new grant opportunities. - Confirm your eligibility: Always read the eligibility criteria before applying. Ensure your business meets all requirements (e.g. size, location, industry, or ownership type). Focusing on grants you clearly qualify for will save you time and frustration.
- Craft a tailored application: Follow all application instructions and make sure your proposal aligns with the grant’s objectives. Explain how your project or business will meet the funder’s goals or benefit the community.
Write clearly and persuasively, highlighting what makes your business or idea unique. It helps to have a mentor or colleague review your draft to ensure it’s clear and compelling. - Provide evidence and data: Strengthen your application with facts. Include relevant data from your business plan, financial statements, market research, or customer testimonials to support your claims. A data-driven, well-documented proposal appears more credible and impactful to reviewers.
- Submit properly and follow up: Double-check that your application is complete and submit it before the deadline.
Keep copies of everything. Many grant systems confirm receipt automatically; if not, you can send a polite inquiry to ensure your materials were received. Be patient during the review process (it can take weeks or months). - Learn from rejection and persist: If you don’t win, try to get feedback on your application. Use any input to improve your next proposal. Many entrepreneurs apply multiple times before succeeding – each attempt teaches you something. Stay persistent and keep refining your approach.
- Use official channels (beware of scams): Stick to trusted, official sources for grant information. Never pay upfront fees for “guaranteed” grants – that’s a red flag.
If someone promises you a grant in exchange for money or contacts you from a non-government email, it’s likely a scam. When in doubt, consult the SBA or an SBDC advisor for guidance.
Frequently Asked Questions (FAQs)
Q.1: Can I get a grant to start a new small business?
A: It’s uncommon to find grants simply to start a typical small business. Most government grants serve specific purposes – for example, funding R&D, encouraging job growth in certain areas, or supporting businesses owned by certain groups. The SBA does not provide grants just to launch a business.
However, if your new venture aligns with a particular program’s goal (say you’re developing a new technology or opening a needed service in an underserved community), you might find a grant that fits. Look for grants tied to your industry or the problem your business solves.
Q.2: How do I find available grants for my business?
A: Use reputable sources.
Start with Grants.gov for federal opportunities – it lists current grants from all federal agencies. You can search by keyword or category. Next, check your state’s economic development agency website for state-level grants.
Also connect with local resources like SBDCs, women’s business centers, or industry associations; they often know about regional programs or private grants. Networking with other entrepreneurs and subscribing to small business newsletters can also help you learn about new grant opportunities.
Q.3: Do I have to repay small business grants?
A: No. Grants are not loans, so you don’t pay them back as long as you use the money as directed. Essentially, grant funds are a gift to your business. You do need to use them for the intended purpose and keep records of how you spent the money. Many grants require you to report on your results and expenditures.
If you misuse grant funds or violate the terms, you might have to return the money or face penalties. Also, note that grant money may be considered taxable income for your business, so consult a tax professional if you receive a substantial grant.
Q.4: What types of businesses are most likely to get grants?
A: Generally, businesses that fulfill a public good or government priority have the best chance.
High-tech and innovative startups – especially those in science, medicine, or technology development – often attract grant funding. Also, businesses that benefit certain communities or demographics tend to have targeted programs available.
For example, rural businesses, minority- or women-owned businesses, and companies creating jobs in distressed areas can find grant opportunities tailored to them.
On the other hand, a typical small retail or consulting business with no special angle will find fewer (if any) grants available. It’s all about alignment with the goals of a grant program.
Q.5: How can I improve my chances of winning a grant?
A: Focus on grants that truly fit your business, and then follow the application instructions exactly.
Clearly explain how your business or project meets the grant’s objectives, and support your claims with solid data or examples. Have someone review your proposal for clarity and errors before you submit.
If the grantmaker offers a webinar or FAQ document, use those insights. Lastly, stay persistent – if you don’t win on the first try, use any feedback to strengthen your next application. Each attempt can bring you closer to success.
Q.6: Are there grants for established businesses, or only for startups?
A: There are grants for both. Many programs are open to existing small businesses – for instance, grants to help companies expand into exporting (like STEP grants) or to train employees or adopt new technology. In recent years, some emergency grants specifically targeted existing businesses.
Startups, on the other hand, can tap into grants like SBIR/STTR if they’re working on innovative R&D, or seek out local startup competitions and micro-grant programs.
Some states have even offered seed grants to brand-new businesses after training – for example, California’s Dream Fund provided up to $10,000 for new small businesses that completed an entrepreneurship training program. The key is to search for grants that match your business’s stage and goals.
Conclusion
Federal and state grants can provide critical funding to launch new ventures or help existing businesses grow. These programs reflect public goals like innovation, inclusion, and job creation, and they give entrepreneurs a chance to contribute to those goals while fueling their own success.
Grants are highly competitive and come with obligations, so approach them with seriousness and preparation. Do your homework on each opportunity and submit quality applications. Persistence is important – you may face a few rejections, but keep refining your approach and keep applying.
Often, entrepreneurs use grants as one piece of their funding strategy alongside loans or investments.
Focus on how your business will deliver results that matter (whether it’s innovative technology, jobs in your community, or serving an underserved market). Aligning with a grant’s purpose makes a strong case for why you deserve support.
Finally, note that beyond government programs, some private companies and nonprofits also offer small-business grants (for example, corporate grant contests or foundation awards). These can be another avenue to explore in addition to public grants.
Good luck with leveraging grants to fuel your entrepreneurial journey!