Why You Can't Find a Grant for Your Business

I get this phone call almost every week.

"I'm looking for grants for my business."

I hate to be the bearer of bad news, but there's a reason you aren't finding them on your own.

Yes, I have grant search software. In fact, I subscribe to two of the largest grant databases available. They're excellent resources, but they are filled almost entirely with opportunities for 501(c)(3) nonprofits.

Why?

It all comes down to taxes and how grantmakers are structured.

Most grant funding comes from either private foundations or corporate foundations. These organizations exist to support charitable, educational, scientific, religious, and community purposes. They aren't investment firms looking for businesses with the next great idea. They exist to improve communities.

Let's Look at Where the Money Comes From

Private foundations are nonprofits themselves. Many corporations also establish nonprofit foundations to carry out their charitable giving. Those foundations receive tax advantages for operating as charitable organizations, but in return they must follow strict IRS rules about how their funds are used. Private foundations are required to distribute a minimum percentage of their assets each year for charitable purposes.

That means their dollars are intended to support tax exempt organizations and charitable work, not private businesses that distribute profits to owners or shareholders.

Even nonprofits aren't completely exempt from taxes. If a nonprofit earns income from activities unrelated to its charitable purpose, such as operating certain businesses or rental ventures, that income may be taxable. The tax rules surrounding charitable organizations are very different from those governing for profit businesses.

So when people ask why foundations don't simply fund small businesses, the answer is that their mission and legal structure generally don't allow it.

Then I usually hear this:

"But my friend got a grant for their business."

I've heard these stories for years.

My response is always the same.

"Great! What's the name of the granting agency?"

Oddly enough, no one has ever been able to tell me.

Now, are there exceptions?

Absolutely.

There are legitimate grant programs available for certain types of businesses. Medical and scientific research, agriculture, manufacturing, technology commercialization, and economic development all have grant opportunities because they advance broader public goals.

Notice the pattern.

Those grants aren't awarded simply because someone owns a business. They're awarded because the project serves a larger public purpose.

That Brings Us to Another Common Question

"What about grants for women owned businesses?"

Women owned businesses don't receive grants simply because they're women owned.

They may qualify for a program designed to advance entrepreneurship, innovation, rural development, or another public policy objective. Several years ago there were more programs targeting women entrepreneurs than there are today. Like many government initiatives, priorities change. Funding shifts. Administrations change. Programs disappear.

I've experienced that firsthand. I've had awarded grant funding disappear because an administration changed priorities.

That's one of the realities of government funding. Unlike private foundations, public funding is only as stable as the budget and priorities of the people in office.

Whenever someone tells me they're waiting for the next wave of grants for women owned businesses, I tell them not to wait for the rain. Look for other ways to grow your business.

In fact, my favorite response is this:

"If there were a magical pot of grant money for women owned businesses, this grant writer would already have it."

Believe me, I'd be first in line.

Final Thought

There are plenty of websites that look like they offer grants for small businesses. Some charge application fees. Others sell memberships, consulting services, or access to databases. Some promote competitions or loans that are marketed as grants.

There are legitimate opportunities mixed in with a lot of clever marketing.

Knowing the difference can save you a tremendous amount of time and money.

But that's a conversation for another blog.