(I published this article in the Galion Inquirer on January 04, 2012)
I think it’s safe to say that most small businesses would love to find grant money, but once they find a grant to apply for, they commonly experience two very large stumbling blocks. First, the proposal process can be very intimidating, and second, they don’t know how to handle the accounting (for tax purposes) of grant awards.
Before I explain the typical application process, there are a few points you need to keep in mind if you’re trying to apply for grants of any type.
First, the process of applying for a grant is referred to by many terms. Although grant writing is the most common term for this process, it might also be called a grant application or a grant response.
Second, grants quite often require the recipient to provide matching funds. For example, you may need to come up with $10,000 before the grantor will give an additional $10,000.
Third, and probably most important, is that the grant writing process is incredibly time consuming. The paperwork required can be as simple as a standardized application, but in most cases the response can be thirty pages or more, just like a business plan.
Many grants can take months of detailed paperwork and financial calculations before you are ready to submit your proposal. The approval process after submission can take up to an additional nine or more months.
Unless you’re knowledgeable about grant writing, and have unlimited free time to work your way through the application process, I strongly recommend that you hire a freelance grant writer. Expect to pay a fee based on the amount of time and effort they need to put into your response.
Plan to pay them when they give you the completed application. They need to be paid for their work regardless of whether or not you get the grant award. Expecting them to get paid after you get the grant money, or by paying them a percentage of the grant award, is not only unrealistic, it is borderline unethical. Even if you don’t win the grant award, you can still write off their fee as a business expense.
While we are talking about fees, be aware that there are many grant-related scams out there, especially on the internet. You should not be required to pay to apply for a grant, although some legitimate web sites sell access to their directory of opportunities for a monthly fee.
Most Small Business Development Centers offer free guidance on how to write a grant proposal. We have two of them in this area. One is in Mansfield, and one is in Marion. To find your nearest SBDC, go to http://www.asbdc-us.org/.
Your local library is also a great place to find books on writing grant proposals. The Galion Public Library has several books on the topic. There is also a wealth of information on the internet if you search on terms like “grant writing” or “grant response”.
Most grant awards come with very strict requirements to keep detailed records as to how the funds are being used. In addition, the recipient will often need to prove that the money awarded was used within the timeframe allotted by the distributors or the proposal.
The flow of a typical grant response goes like this: research and locate the opportunity, complete the application, and keep detailed records.
You can try to locate grants you are qualified for by searching at http://www.sbir.gov/ or https://www.cfda.gov/. You can also search for community foundation grants at http://www.foundationcenter.org/. They list over 200 community foundations in their database.
Next, complete the required paperwork. This is where hiring a freelance grant writer makes incredibly good business sense. When applying for small business grants, make sure to be thorough and complete. Most opportunities will require very lengthy applications. Follow their instructions exactly. Being inaccurate or skipping questions may disqualify you.
A very detailed overview of the typical grant response process can be found at http://grants.nih.gov/grants/grants_process.htm.
Now that you’ve been awarded that grant money, it’s time for you to deal with the record keeping, reporting requirements, and accounting issues that come along with the money.
If you get a grant, it is reported as income on your taxes. You’ll receive a 1099G to report the grant on your taxes as income. However, it’s not as bad as it sounds. Most grants aren’t given without a specific purpose or use, so the expenses that you incur actually performing whatever you proposed actually offsets the income. If the numbers in your proposal are anywhere near correct, then your expenses should equal your income and it becomes a “wash”.
Most grantors will also require you to make periodic reports of the project status and money used. Make sure you file the reports in a timely manner, and include as much detail as required. Although you may have already been awarded this grant, failure to follow the required reporting procedures could keep you from getting that next grant.
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