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Why Small Business Grants Exist

Starting or expanding a company, whether it is home-based or adding another location, can be very difficult to do. In most cases it requires money that small business owners do not have. Small business grants were created by local governments and non-profit organizations to help entrepreneurs establish their businesses and continue to grow.

Why would anyone care about helping people fund their businesses? Well, tax dollars for one.  Government agencies are interested in helping small businesses because it means more tax revenue for them. The more successful your business becomes the more taxes you will pay, and the more people you will employ who will also be required to pay taxes. In addition, small businesses drive the economy.  If your company is successful, it is also very likely that you will be keeping other companies in business.  The U.S. government is very competitive in driving economic growth through regional industrial development.  Here are some interesting statistics:

  • Ninety-nine (99) percent of employing businesses are “small” under prevailing definitions. Another way to look at  it: 60 percent of all businesses that employ people other than the owners have 1 to 4 employees; another 20 percent have 5 to 9 employees; and yet another 10 percent have 10 to 19 employees. Businesses employing fewer than 100 people (excluding the self-employed who employ no one but themselves) constitute 96 percent of all employers (Source: calculations by NFIB Research Foundation from data published by the Office of Advocacy, U.S. Small Business Administration.)
  • Small business provides about 55 percent of all jobs in the private sector. (Source: NFIB Research Foundation calculations from data produced by the U.S. Bureau of Labor Statistics, the U.S. Bureau of the Census, and the U.S. Small Business Administration.)
  • American small business produces roughly one-half of the privately generated GDP in the country, a figure unchanged since the 1970s (Source: Joel Popkin and Company, Small Business Share of Economic Growth, 2001, Office of Advocacy, U.S. Small Business Administration.)

It is easy to see why the government is so willing to help small business owners.

In addition, the government offers SBA loans from the Small Business Administration, a federal government agency. Although this type of funding represents money that needs to be repaid, it is another initiative designed to help the small business community grow. And the loans are often structured at lower-than-usual interest rates. There are many common types of government loans available for small business, the details of which can be found at the Small Business Administration web site.

Business grants are also given by corporations for community relations purposes. Many major corporations like General Electric, Ford, Wal-Mart and others have foundations that give money to businesses, charities, relief efforts, and college funds and more. This helps the company to have a good image in the public eye, which supposedly encourages customers to be more loyal. Some even give business grants to low-income families and individuals who want to become business owners.

Many corporate grants are also limited to local community and/or non-profit organizations.  The Foundation Center provides a directory of over 200 corporate grantmakers.


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