SCORE Minnesota

Small Business Taken for Granted

June 3, 2010

The subject of grants often comes up when people are starting a business and looking for funds. Grants can be a great source of funding for a small business because, unlike loans, they don’t have to be paid back.  However, there are vast numbers of businesses that are not eligible for these grants.

There are many sources for grants and many purposes as well.  The reality is that many small businesses are not often awarded grants because the qualifications are quite arduous. In addition, grants frequently come with strings attached.

The federal Small Business Administration administers two programs for small businesses involved in research and development for many federal agencies.  They are the Small Business Technology Transfer (STTR) program and the Small Business Innovation Research (SBIR) programs.  The Office of Science and Technology of the Department of Employment and Economic Development of the State of Minnesota can help small businesses navigate these programs.  Betsy Lulfs (betsy.lulfs@state.mn.us), its director, is ready and willing to help you get started on what she describes as the minimum 5 year journey to obtaining and utilizing these funds.

STTR funding is exhausted for this year, but it is expected to restart next year.  STTR awards federal research and development (R & D) funding to small businesses in partnership with nonprofit research institutions to move ideas from the laboratory to the marketplace, to foster high-tech economic development and to address the technological needs of the federal government.

There are 3 phases to an STTR grant. Phase I is the startup phase for the exploration of the scientific, technical, and commercial feasibility of an idea or technology. Awards are for periods of up to one year in amounts up to $100,000.  Phase II is to expand Phase I results. During this period the R&D work is performed and the developer begins to consider commercialization potential. Awards are for periods of up to two years in amounts up to $500,000.  Phase III is the period during which Phase II innovation moves from the laboratory into the marketplace. There is no STTR funding in this phase.  See STTR Overview for the state’s information on STTR.

The Small Business Innovation Research (SBIR) program provides federal grants for small companies in critical startup and development stages, helping them to compete with larger, more established companies.  Each year, 11 federal departments and agencies set aside a portion of their research and development funds to award to small business.  Strong SBIR candidates are small businesses that have an innovative technology or apply an existing technology in a novel way. In addition, they:

•Demonstrate strong commercial potential for that technology.

•Are able to perform at least two-thirds of the Phase I work and half of the Phase II work in their facilities. The rest may be done by consultants or subcontractors.

•Have key staff with the expertise and experience necessary to perform the work outlined in the proposal.  See SBIR Overview for the state’s information on SBIR.

There are many other grant programs, but the ones I have found are basically contracts to do some particular work the granting agency wants completed.  For instance, Hennepin County has grant programs for sealing old wells; projects of non-environmental, community organizations to carry out innovative, community-based projects related to waste and toxicity reduction; grants to local public entities and non-public schools to support projects that reduce waste and toxicity; and projects that will reduce erosion and stabilize stream banks throughout the county.

Ramsey County provides funding for programs providing direct assistance to suburban Ramsey County consumers as well as other types of funding available to suburban communities, developers and other organizations.   Consumer programs for residents of suburban Ramsey County include home purchase assistance as well as housing rehabilitation and weatherization.  Ramsey County also administers competitive funding award programs for units of local government, non-profit organizations, businesses and developers.  These include Community Development Block Grant (CDBG), Housing Investment Partnership Act (HOME), and the Ramsey County Environmental Response Fund (ERF).  Other counties have similar programs. However, none of these programs look like a way to get a small business funded.

The City of Minneapolis in the fall of 2008 published a long list of loans and grants available to businesses in the city from many different organizations.  Some of these may be of use for certain small businesses.

Another source for a long list of government grants is Grants.gov which consolidates many offers from many granting agencies in the federal government.  These grants tend to be for specific activities that an agency needs to perform but needs help to do so.

There are many foundations and community organizations that offer grants for activities in their areas of focus, like medical research, community development, and various quality of life issues.  In my search I did not find any kind of consolidation of these types of grants and they change from time to time.

In summary, grants can be a great source of funding if a business fits the exact specifications of the grant. The businesses most likely to qualify for a grant are engaged in scientific research, technology, or medical fields. However, there are vast numbers of businesses that don’t fit into those categories. Those businesses will have to seek funding from other sources.  For more information on grants and funding for a small business check out the Small Business Administration.

To learn more about how to start, operate and grow a successful business contact SCORE by clicking the link on the right to the office nearest you or click here to request free face to face counseling.

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Dan Nissen, St. Paul SCORE
View more posts by Dan Nissen

Filed under: Capital,SBA,Start-Up

Tags: Betsy Lulfs, Funding, grants, Office of Science and Technology, SBA, small business, Small Business Innovation Research, Small Business Technology Transfer