As someone who provides assistance to startup businesses, I’m often asked about the availability of grants. My response is always, “It depends.” This article explains what grants are available to startup businesses and how they typically find funding.
The first thing to clarify is whether the business is for-profit or nonprofit. While for-profit and nonprofit businesses follow a similar process when starting up, nonprofits operate differently and are eligible for more funding sources.
Nonprofit business grants
Nonprofit organizations do not have owners; a board of directors governs them. They serve a humanitarian or environmental need and reinvest all earnings back into their programs that further their mission. Typically, educational institutes, municipalities and many social service organizations are nonprofits. The majority of a nonprofit’s revenue is earned by providing goods or services, and only a portion of its funding comes from grants, foundations and individual contributions. However, their services are critical and their need is great, which is the reason most grant opportunities are available to nonprofits.
Locally, the Finger Lakes Grants Information Center provides free public access to the Foundation Center, a directory of foundations and grantmakers across the United States. While there are many services FLGIC provides, the valuable outcome is the money they help bring into central New York that supports our nonprofits. For more info, visit flgic.org.
The Grants Gateway was launched in 2013 by New York state to streamline the process for nonprofits to register and become qualified to apply for state grants. Once organizations are prequalified, they can search, apply and obtain awards through the state. For more info, visit grantsreform.ny.gov.
For-profit business grants
The goal of for-profit businesses is to maximize profits for the company’s owners, shareholders, investors and/or employees.
Federal grants through the Small Business Innovation Research and the Small Business Technology Transfer programs are available to small businesses that are “engaged in scientific research and development.” Therefore, only startup businesses that meet federal R&D objectives and have a high potential for commercialization are eligible for this type of grant money. For more info, visit sba.gov/loans-grants/find-other-sources-financing/research-grants-small-businesses.
In 2011, Gov. Cuomo established the 10 Regional Economic Development Councils of New York state to provide a more customized approach to economic development funding. Growing businesses (both nonprofit and for-profit) that are expanding by making a significant capital investment and creating jobs would apply for funding through the state’s Consolidated Funding Application. For any business or organization interested in applying for a state grant through the CFA process, there is an upcoming Intent to Propose Forum at 8:30 a.m. Tuesday, Feb. 28, in the Student Lounge at Cayuga Community College that will explain the process of applying for the next round of funding. For more information about this event, visit cayugaeda.org/news.
For existing businesses in Cayuga County planning to expand, contact CEDA Economic Development Specialist Bruce Sherman for further information and assistance with your project.
Funding a new business
Since a majority of the startups I assist don’t qualify for any of the above grants, let’s discuss the process for funding a new for-profit business.
The first step of starting a business is to write a business plan. The business plan is not only required by banks when applying for a business loan, but it is also the entrepreneur’s personal guidebook for their business. A business plan defines the product or service, assesses the business’s internal strengths and weaknesses, identifies the opportunities and threats in the marketplace, strategizes a plan for bringing the business to market, and calculates financial projections for the first few years. The business plan is the first step and most important. Once completed, the person knows if they have a viable business idea or not.
Today, there are new and innovative ways to raise capital: You can start a crowdfunding campaign, find an angel investor or even pitch your idea on "Shark Tank." However, a business loan through your local bank or credit union is the most common. In addition to a traditional bank loan, there are competitive loan programs offered by Cayuga County and the city of Auburn. For more information on local loan programs, contact CEDA.
The federal government assists for-profit startups (aside from the few grants for R&D) via the Small Business Administration: sba.gov. While the SBA does not loan money, the SBA guarantees business loans for banks. Since startups have no financial history, banks are more comfortable lending with an SBA guarantee.
SCORE (score.org) is a partner organization of the SBA that provides free and confidential mentoring to business owners. They have played an important role in the startup and growth of many of our local businesses, which helps ensure those SBA loans are repaid.
In conclusion, the type of funding available for your business depends, but with all of the business assistance offered at 2 State St., contact CEDA and we can figure it out together.