Free Cash for Your Business

Small business grants are rare, but they do exist. Here's how to find them.

By Eilene Zimmerman, CNNMoney.com contributing writer

When hunting for cash, desperate small business owners may find themselves sucked into buying books and software packages promising "Billions in Free Grants!" from Web sites with names like NeverPayItBack.com, or hiring consultants who promise to find them gads of money. All they're likely to get, though, are empty promises.

GRANTS, REALLY?
Grants are rare, but the information you need to find and apply for legitimate ones is publicly available and free. For qualifying businesses, there really are opportunities to land free money from state, county and city governments, as well as private foundations and corporations.

TECH HAS BEST CHANCE
Technology startups traditionally have the best chance of getting grant funding, often through the federal government's Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) programs. These programs are lucrative, awarding more than $2 billion each year, but both require a tight match with exacting requirements.

For most companies, a better fit will be the grants many state and city governments offer for small, tech-focused businesses. In Columbus, Ohio, TechColumbus offers TechGenesis grants of up to $50,000 to allow entrepreneurs to test their ideas and see if they are business-worthy. The Ben Franklin Partnership in Philadelphia and the Maine Technology Institute in Gardiner, Maine, are two more of the dozens of organizations that invest in local tech companies with growth potential.

THE REST OF US; A FEW OPPORTUNITIES VIA GOVERNMENTS
Finding grant money for non-tech businesses is a little tougher. The first step: Figure out if you qualify for any special small business certifications, such as a minority-owned, disadvantaged, woman-owned or veteran-owned business. Federal and state governments sometimes give priority for grants to these types of business owners. Then look at your local government Web sites -- for your city, county and state -- and find the economic development agency or area equivalent. Many of these agencies offer government-sponsored grants to attract new businesses or help existing firms expand, train workers, or become more environmentally friendly. For instance, the Illinois Department of Commerce and Economic Opportunity offers matching grants to businesses that want to expand and modernize their recycling programs, while the Central Oregon Intergovernmental Council gives workforce training grants to businesses in several Oregon counties.

Next, sign up at Grants.gov to receive information about specific kinds of federal grants. Few businesses will directly qualify, but with some creativity, you can find ways to tap the cash flow, says Kate Lister, author of Finding Money --The Small Business Guide to Financing.

"Let's say you own a small plumbing company," Lister says, "and at the federal level there is a grant for capital improvements for which only schools can apply. Sign up to be notified of anything that happens with that grant and post your own note to it that says, 'I'd like to be a subcontractor on this.' Or go to the contracting officer listed and say, 'Here's what I can offer.' Since that contracting officer is the person who will notify the winner of their grant award, he can also say to the school: 'Hey, I've got a contractor you might want to try.' And even if this isn't the right grant for you, there might be something else down the line, so connecting with these contracting officers is really all about networking."

WORKFORCE TRAINING
Another avenue for grant money is workforce training. Most states have grants, often funded through the unemployment insurance tax system, says Michael Godley, principal at Workforce Development, a consultancy in Boston that focuses on helping business owners tap into workforce training funds nationwide. A good way to find these grants is by simply Googling "workforce training funds" within your state, or contacting local community colleges -- they often administer the funds -- or a workforce investment board.

The legislature in Massachusetts, for example, just funded its workforce training fund at $10 million. That's down from the previous year, when it got $21 million. But as Godley points out: "Ten million is still a lot of money. And that will go to a few hundred companies."

FACILITIES UPGRADES
Small manufacturers can find grants for upgrading facilities or updating processes by looking at their state's Manufacturing Extension Partnerships. Nearly every state has one, says Bob Kill, president of Enterprise Minnesota, which provides Minnesota-based manufacturing companies with matching grants for process improvement or staff development. In New York, Empire State Development offers capital grants of up to $1 million to manufacturers with as few as 50 employees, through its manufacturing assistance program.

GRANTS FOR NON-PROFITS
A good source for foundation grants is the Foundation Center, which offers basic information on U.S.-based foundations, grant-making public charities and corporate giving programs. Most of these sorts of grants go to non-profits, but one way small businesses can broaden their suitability for grants is to create a not-for-profit offshoot to their business. The not-for-profit side usually offers different or less comprehensive products and services than the for-profit, says Dave Lavinsky, president of Growthink in New York City, a consultancy that assists startups in developing business plans and raising capital. A for-profit children's theatre company, for example, could have a non-profit arm teaching after-school drama programs.

No matter what grant you apply for, remember that the cash is usually earmarked for funding specific projects or products -- not entire companies. If you want free money, be prepared to adapt. "A lot of times business owners will modify their business based on funding opportunities," Lavinsky notes.