Grant funding is not what most entrepreneurs consider when they think of raising capital, but government and private-funded grants can at times be a lifeline for small businesses or a way to finance your expansion into promising new markets.
Despite the new money made available by the federal stimulus program, grant funding is not easy to nail down.
"Grants are extremely hard to win even with a great business model," remarks Christine Harmel, a principal at CleanTech PR, based in Austin. The competition is tough. Lead-times can be long. Even knowing when the right grant is available can be challenging.
But companies are getting money, and in certain industries funding opportunities are better than ever: healthcare, education, science, and environment are the top categories for federal grants currently based on the number of grants available, says Elaina Farnsworth, also a principal with CleanTech PR, who helps clients with grant-writing. In healthcare alone, 939 grants are currently up for grabs.
Recently, a client of Gregory Burkart, Detroit-based managing director of financial advisory and investment banking firm Duff & Phelps, received a $150 million grant from the US Department of Energy to support the development of lithium ion batter cells.
Here are a few tips on how to get started and how to maximize your success:
1. Determine your viability
Once you determine grants that you want to target (even a Google search can yield many opportunities if you can't afford to hire a consultant to advise you), you and your management team need to do the necessary research to determine how closely you will be able to match the requirements of the grant. Tasks include interviewing people within the company, talking with investors and partners, and doing research on the competition in your market, Farnsworth advises. If you've never applied for a grant before, this process could take up to a month.
It's also a good idea to make friends with the grant administrators, who will be happy to give you some feedback on your viability for their particular award. "Get to know your grant officer and their constraints, budget, and concerns with approving your grant," says Darrell Zahorsky, a small business consultant and expert with About.com.
2. have a watertight business plan
While that may seem obvious, companies don't often update these documents and sometimes never have a good one from the beginning. "Pay very close attention to your financial plan," says Gregory Burkart. If you are dealing with the federal government, you have to address a number of audiences -the agency administering the grant, the Treasury Department, any financial institutions that will be your intermediary, credit agencies, the Office of Management and Budget (OMB) and more.
3. Commit the time and be patient.
"You'll need at least two weeks to prepare for an application but most of them take about a month," Farnsworth says. And then, if you get into the final selection, you may have to redo the paperwork again and then wait another two or three months to find out if you won, she adds.
4. Follow the requirements to the letter
Read the application carefully and make sure that you clearly understand exactly what technology/product/service/expertise the grant is seeking. "Don't come into the competition with something different than what they are asking for and make sure that your technology scales to what they need," Burkhart says. As a final check, Farnsworth typically e-mails the grant administrator to make sure that there have been no last-minute changes or additions to the grant application.
5. Find a partner
Applying for a grant with a partner, such as a nonprofit or university, can increase your chances of not only winning the award but getting more money, says Farnsworth. This is particularly important for government grants, since their focus is often on research. And some grants require that you partner with a non-commercial entity. Farnsworth says that she often will contact the business developer directors at universities to promote her clients as potential partnering candidates.
6. Consider outsourcing
Unless you have a lot of time on your hands and/or a grant expert on your staff, there's a considerable benefit from having someone else research, apply for, and manage the grant process on your behalf. Fees will range from upfront fees to contingency arrangements to commission percentages if you win an award. CleanTech PR typically charges anywhere from $1000 on up, depending on the complexity of the grant application.
Applying for grants is no trivial matter. It requires research, time, patience, and the possibilities of nothing in return-just like bidding on a new project or trying to win over a significant new customer. But even if you don't win, the process can be an excellent exercise in fine-tuning your strategy and messaging.
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November 16, 2009