Government Funding Can Elevate Your Business: But Know What You’re Getting Into
Funding is always at the top of mind for small business owners. From startup costs to expansion, your current cash flow dictates how you structure your business and plan for the future.
There are as many different funding stories as there are businesses. Venture capitalists, self-funding, crowd-funding, and loans can all be a good fit at times, but in some industries, government grants are the easiest, fastest way to grow.
There are pros and cons to working with government funding, but if you go into the process armed with facts and flexibility the pros generally outweigh the cons.
The upside to government funding
Government funding is appealing for obvious reasons. It’s generally free to apply for and, unlike a loan, doesn’t need to be paid back. Most government programs also offer some form of mentoring service or access to research and development opportunities. With more resources at your fingertips, you can level up your skills as a business owner.
Government grants also provide instant credibility to your organization. Having the backing of a state, federal or national agency shows that you have a solid plan and beat out other proposals. That vote of confidence can go a long way in attracting customers and investors.
Do your homework
As with most things in business, working with government funding is complicated.
Finding grant opportunities is generally as simple as searching the internet, but finding the right opportunities is a different matter. Government grants generally have a focused set of goals and strict requirements. Applying for grant money that isn’t a good fit is a waste of time.
Once you’ve identified a solid funding opportunity, it’s good to do some background research on the grant process in general. Things move fast in the corporate world, but the government operates a little differently. Expect the process of applying for and being awarded funding to take at least 6 months.
You should be prepared for the complexity of the process, as well. Missing technical details can disqualify your application. Plan on turning everything in ahead of schedule, so you have time for last-minute additions and corrections.
Know the cost
While government grants don’t drain your financial resources directly, don’t be fooled into thinking there is no cost associated with them.
Once you get through the application process, if you’re awarded a government grant, there are conditions attached. You’re expected to provide regular reports, which means a lot of paperwork and a large time investment. You are responsible for the administration of the funds, and must stick with the plan you outlined in your application.
In some cases, you might also be asked to participate in PR efforts, giving press interviews or meeting with government officials. Think of these events as opportunities to put your business in front of new audiences.
An influx of cash is always welcome, but when it comes through bureaucratic means, you will be pulled into some red tape.
Have a plan B
When working with the government, you are at the mercy of the political landscape. This means that the people you work with, policies and procedures, and departmental goals can change every couple of years.
An awarded grant is like a contract––the money that you’ve received or are due to receive over the course of a year or two won’t be affected by every election. That said, you need to be aware of politics, shifting legislation and administrations when working with government agencies. Electoral results can definitely have implications for future funding opportunities.
Grants also run out after a set period of time, and it’s not guaranteed to be renewed. Using government funding to add to your business is a good plan, but relying too heavily on that money can set you business up for failure if it falls through. Plan ahead, and have an exit strategy if you don’t receive grant money in the future.
Government grants are an incredibly useful tool for small business owners, but navigating the process takes patience and real work. Understand the advantages and disadvantages before diving in, have a backup plan, and you’ll be well prepared to take advantage of the valuable programs available to small business owners.
About the Author
Tim Carter is an entrepreneur and the owner of Discovery Tree Academy, a top rated childhood development center with locations in Springville and Payson, UT. Tim began his entrepreneurial journey at the young age of 19. He has experience in sales, professional cooking and is even a licensed pilot. Weaving his diverse talents together, Tim is on a mission to create a better childcare model. His passion lies in helping kids thrive, including his own daughter and twin toddlers at home.