You are developing a really cool solution to a problem or providing a service/product that can benefit others, but the thing is you are a for-profit. You want to help others, but you also need cash to run this part of your business. You aren’t sure if you can get grants for your idea/product/service as you have been getting mixed messages from those around you. The businesses say, “Sure, there is tons of funding out there,” and the nonprofits roll their eyes and say, “only if you are a nonprofit.”
Let me tell you, I get a lot of e-mails asking how to get grants to fund start-up businesses. The answer is “er, yes, well sometimes, maybe, if applicable, not so much, but sure.” More succinctly the Foundation Directory states, “Grantmakers typically fund organizations that qualify for public charity status under Section 501(c)(3) of the Internal Revenue Code. These are organizations whose purposes are charitable, educational, scientific, religious, literary, or cultural.”
But before you throw your hands up in defeat, let me stress the word typically. To be clear, I am not saying, “You can get grants for anything your heart desires to make you money.” But, I do get enough questions about funding for for-profits that I wanted to create a clearer answer than the above, “er, yes, well sometimes, maybe if applicable, not so much, but sure” or just give you the Foundation Directory’s broad sweep of an answer and leave you in despair.
Why is this such a difficult and convoluted answer? It really depends on what your business is doing and why you are looking for grants that will lead to how your business might get funding.
(Here's a link to see what types of grants are available for for-profit small businesses!)
So let’s start with the what and the why.
The What & The Why
- What? Are you conducting social entrepreneurial work? I.e. not asking for profit for a side project that is serving a need?
Why? To help meet a gap in your community.
- What? Are you creating an innovative product?
Why? The product could be used to serve others or meet a need (i.e. creating an organic fertilizer that could be used on a mass scale at an economic price or creating hearing aids through 3D molds that can be mass produced at a low price for refugees in the Middle East – Shout out to http://www.3dp4me.org/ who is doing the latter as a nonprofit)
- What? Are you providing a service for your community that will benefit the community as a whole?
Why? To benefit the entire community. These are often system-wide projects like waste-reduction, offering new jobs, sustainability projects, etc.
If your business is looking at creating any of the above, or something similar that would benefit not just your company but a wider-network, then you may be eligible for certain grants. Now if you are looking to create a product, project, or service that will only benefit your company’s ROI then you probably will not be eligible for grants.
There must be a greater connection to the community, nation, or world, and then there are certain grants that look at funding for-profits (see more below). But first, here are three ways of how you set up your project that may get funding:
1) Staying Entirely For-Profit: Sometimes for-profits receive grants if they show that the project they are doing is 'not-for-profit'. This is okay, but you won’t tap into the entire cadre of grant funding because many foundations do require a tax-exempt status. But, some funding sources specifically fund only for-profit or include for-profits as eligible grant applicants (see below examples). As you do your grant research you can see if this is a viable option based on the eligibility factors that you come across.
2) Nonprofit Arm: The other thing you could do is open a side nonprofit arm that would do this type of nonprofit work. You need to be very clear about the separation of your funds between the nonprofit and for-profit, but this could be a way in which you carry out your nonprofit projects. If you choose to open a nonprofit, sign up for the Grant Writing & Funding Free Membership to get a copy of the 1023 form/checklist to register as a formal nonprofit. You do have to submit for tax-exemption purposes and open your own nonprofit with this option.
3) Partnering With An Existing Tax-Exempt Nonprofit: Partnering with an existing tax-exempt nonprofit that does similar work is the most ideal. In some communities there is an umbrella nonprofit that provides this partnership. In this way your project would be falling under their nonprofit status. This is sort of like a subcontractor or subrecipient relationship, although your organization may be doing most of the work for the project you would use their name, DUNS, SAM, EIN, and demonstrate the relationship between your organizations. Just make sure you have a signed MOU with them that articulates the scope of work and relationship so there are no misunderstandings, and you get paid.
4) Create A Crowdfunding Campaign. If you really believe in your work and you think there is a market for product and service, then you may look at crowdfunding to secure potential customers to basically pre-order and create the capital needed for creating the products / services.
It really goes back to what your company is doing, why you are doing it, and how it benefits others. Currently (2018), there is a huge focus on technology innovation, so there may be more grants available for your for-profit or a market demand to create a crowdfunding campaign. But if your business is a Pilates Center and wants to provide classes for youth with disabilities, then it may be better to partner with a nonprofit that serves youth with disabilities and submit the grant project through this partnership. However, in either case, you still must follow grant application guidelines and make sure that you are eligible.
I hope this gives a much clearer answer than “NO! There are typically NO grants!” Or, “er, maybe, not so much, yes.”
For-Profit Grant Opportunities:
Lend Edu: Small Business Grant Opportunities Search Bar
Visit your Local / State Economic Development Agency and ask what opportunities are available
105 Grant Opportunities for Business (Great blog with 105 links!)
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