Grant

Small-Business Grants: What They Are and How They Work

A small-business grant is a financial award—typically from a government agency, foundation, corporation, or nonprofit—given to a business to support a specific purpose. Grants are essentially gifts and generally do not need to be repaid, but recipients must use the funds according to the grant terms and comply with reporting and audit requirements. Misuse can trigger repayment obligations.

Key takeaways

• Grants are awards, not loans, and usually do not have to be repaid if terms are met.
• Grants are targeted and often competitive; the application process can be time-consuming.
• Main grant types: federal, state/regional, corporate, specialty, and startup.
• Grants are generally taxable and count as income unless law specifies otherwise.
• Whether you can pay yourself with grant money depends on the grant’s allowable uses.

How the grant process works (the lifecycle)

The typical grant lifecycle has three phases:

1. Pre-award: The grantor defines priorities, announces funding opportunities, and accepts applications.
2. Award: Successful applicants are notified, legal terms are finalized, and funds are disbursed.
3. Post-award: Grantees report on progress and expenditures; grants are monitored and eventually closed out when goals are met.

Non-government grantors may vary in oversight intensity, but the basic phases are similar.

Types of small-business grants and examples

Grants vary by purpose and audience. Below are common categories and representative examples.

Federal grants

Federal programs target specific activities such as research, export development, and technical assistance.
* SBIR/STTR: Grants for small businesses conducting scientific R&D with commercial potential.
SBA programs: The SBA provides limited grants and funds programs (e.g., Empower to Grow for management/technical assistance and STEP for export development). Note: the SBA generally does not offer grants to start or expand a typical business.
USDA Rural Business Development Grants: Support technical assistance and training for small rural businesses meeting size and revenue thresholds.

Resources: Grants.gov is the central federal grant database.

State or regional grants

State agencies and regional economic development offices fund projects that advance local priorities—workforce development, infrastructure, equity, and business growth.
* Examples include state minority business development programs, local neighborhood business grants, and workforce training grants (e.g., Skills for Small Business).

Corporate grants

Corporations run grant programs to support communities and promote innovation.
* DoorDash Restaurant Disaster Relief: Grants for small restaurant operators affected by disasters.
Visa Everywhere Initiative: Prizes and grants for fintech startups with innovative payment solutions.
FedEx Small Business Grant Contest: Annual contest awarding multiple cash grants to U.S.-based small businesses.

Specialty grants

These target defined groups or industries—veterans, minority entrepreneurs, LGBTQ+ businesses, restaurants, etc.
* Queer to Stay Initiative: Grants to preserve LGBTQ+ small businesses and community spaces.
* Military Entrepreneur Challenge: Competitive grants and support for veteran and military-family entrepreneurs.

Startup grants

While federal support for start-up capital is limited, many foundations, corporations, and local programs offer startup grants.
* Incfile Fresh Start Grant: Small cash award plus business formation support.
SoGal Black Founder Startup Grant: Grants for entrepreneurs who self-identify as Black women or Black nonbinary founders.
Local chamber or downtown revitalization startup grants: Often focused on specific neighborhoods or underserved founders.

Grant directories such as GrantWatch can help identify nonfederal opportunities.

Common questions

Is a grant a loan?
No. Grants are not loans and typically do not require repayment if you meet the grant terms.

Is a grant taxable?
Yes—grants are generally considered taxable income at the federal and state level unless a specific law or exemption applies.

Can you pay yourself with grant money?
It depends on the grant’s allowable expenses. Some grants permit salary or payroll costs; others restrict funds to specific project expenses. Always check the grant terms.

Do grants have to be paid back?
Not if you comply with the grant conditions. Failure to meet obligations, misuse of funds, or inadequate reporting can require repayment.

How to approach applying

• Identify grants that match your business purpose and eligibility.
• Read application requirements and allowable costs carefully.
• Prepare detailed budgets, work plans, and evidence of capacity.
• Expect competitive review and time-consuming reporting if awarded.

Conclusion

Small-business grants are a valuable funding source for targeted projects, capacity-building, research, and community-focused initiatives. They’re competitive and often come with strict use and reporting requirements, but for eligible businesses and projects they can provide non-dilutive capital and other support. Use centralized resources (like Grants.gov) and industry-specific directories to find opportunities aligned with your goals.