Finding Non-dilutive Capital for My Business
Funding and operating your business in the startup phase, can be incredibly challenging. Lack of experience, connections and minimal credit history makes it difficult to break into traditional loans and/or raise capital from investors.
This is why securing non-dilutive capital or grants is a great way for first-time founders or founders with limited resources and connections to fund their business in the early days.
What does Non-Dilutive mean?
Non-dilutive funding refers to any capital a business owner receives that doesn’t require you to give up equity or ownership. Contributions from donors, tax credit programs, vouchers, grants, competitions, and even family constitute forms of non-dilutive capital. Although non-dilutive funding is often considered most helpful during the establishment of a company, businesses of all sizes rely on it at different stages of growth. Just ask established businesses that took advantage of the Government's Payment Protection Program (PPP).
Types of Non-Dilutive Funding
Common types include crowdfunding, loans from family, licensing, product royalties, tax credits and other awards. Grant awards, whether from governmental or non-governmental entities, are often the most prized form of funding, since they immediately allow the company to fund day-to-day operations, develop products, perform clinical trials and redesign marketing material.
Where can I find Non-Dilutive Grants for my business?
Start with your local government. Often local governments, at the city or state level, have programs and funding available for entrepreneurs and small businesses. These grants are often administered by the Economic Development arm of the municipality or state. Just google the name of your city or state and add Economic Development. The official entity should have a section for support to entrepreneurship or small businesses.
Next try Federal Grants on sites like the U.S. Small Business Administration Grants Site where they list federal funded grants like Covid-19 Relief Programs, Research and Development Programs. You can also search and apply for grants by going to Grants.gov, a database of federally sponsored grants. To apply, you must obtain a DUNS number for your business (a unique nine-digit identification number), register to do business with the U.S. government through its System Award Management website, and create an account.
Be sure to also check out Charitable/Industry Grants and Pitch Competitions. Several Foundations and Corporations have grants and pitch competitions for entrepreneurs in their industry or for traditionally underserved entrepreneurs. Examples include: Eileen Fisher, a women’s clothing retailer, awards a total of $100,000 to up to 10 women business owners each year. FedEx awards up to $25,000 apiece to 10 small businesses annually. NAACP teamed up with Beyonce BeyGOOD to expand economic opportunity by awarding grants of $10,000 to Black led business owners (StitchCrew alumni, Dr. Tabatha Carr is a recipient of this program!). The Latino Community Foundation also provides grants to Latinx Business Owners.
There are hundred more like this, so start researching and make a list of those that make sense for you. You'll also have to work on making the case as to why your company deserves funding over hundreds of others. And remember, pitching to organizations for non-dilutive funding is very different than pitching your startup for equity investment.