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Alternative Funding Sources: Grants
When you get a loan, you have to pay it back, plus a little bit more. When you find equity financing, you give up part of the ownership of the company. But when you get a grant, you don't do either of those things. You just get cash.
Grants may very well be the best type of financing available for a small business. It's hard to beat money with no strings attached. If you can find an organization that gives grants to small businesses, it's almost certainly in your best interest to pursue that option.
A simple Google search of "grants for small business" yields 4,250,000 results. Many of these funding sources are from the federal or state government, but some also come from private organizations. The unfortunate thing about grants is that there are often very specific requirements that a business must meet in order to be eligible-such as ownership, revenue, line of business. However, it is undeniable that businesses who do receive grants have a powerful advantage.
One especially prominent example of a company that received grant funding is Maxygen. This publicly traded firm was founded in 1997 by an entrepreneur who received grant funding from the federal government's Department of Defense. Since then, Maxygen has gone public and received additional grant funding on at least one other occasion. By the end of 1999, the company had already received an astounding $27 million dollars in grant funding, from the National Institute of Science and Technology and the Defense Advanced Research Project Agency. Maxygen was eligible for grant funding from these sources because of the unique biotechnology sector they operate in.
While not everyone is going to receive nearly $30 million in grant funding, there are lessons to be learned here. There's a good chance that your business falls under the umbrella of a specialized industry or an organization that looks to fund specific types of businesses. The money is out there, it's just a matter of finding it. Check with your local and state government, and also research trade organizations that operate in your area or sector. Though they may have a reputation of being difficult to find, grants are too good an opportunity to pass up.
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