State and local grants
Money from a state, county or city that you do not repay, usually tied to creating jobs, investing in a place or a set purpose. Rare, competitive and slow, and the field is full of "free government grant" scams.
- No security
How it works
Start with what does not exist. The federal government does not give grants to start or expand a business: USA.gov says there are no federal grants for starting a business, and the SBA says it does not provide grants for starting and expanding one. Federal grants mostly go to states and organizations. The federal exceptions for businesses are narrow: research grants (SBIR and STTR), export grants passed through the states (STEP), and some rural and farm grants (USDA).
State and local governments run their own programs, usually through an economic development agency. Programs such as California's (see below) are typically:
- tied to commitments, such as a number of full-time jobs or an amount of investment in the state, with money paid back (clawed back) if you fall short;
- competitive, with application windows and scoring;
- for a set purpose or place, such as a struggling area, a sector the state wants to grow, or training staff.
Many states offer tax credits rather than cash for the same goals; see business tax reliefs.
Beware of grant scams. The FTC warns that offers of free government grant money are scams, and that no government agency will contact you to demand a fee to get a grant. Real programs are listed on official government sites, and the SBA contacts businesses only from email addresses ending in @sba.gov.
Upsides and downsides
Upsides
- Money you do not repay if you meet the terms
- No ownership given up
- Can come with other help from the state's economic development agency
Downsides
- Rare and competitive, with set application windows
- Usually tied to jobs, investment or a specific place
- Slow, with decisions that can take months
Risks
- Clawback if you do not create the jobs or make the investment you promised
- Scams that pose as government grants and ask for a fee
What it costs
- How it is priced
- Free to receive, but often with commitments (jobs, investment, staying in the area) that you repay if you miss
- Costs that are easy to miss
- Time spent applying and reporting, often for months
- Repayment (clawback) if you miss the jobs or investment you committed to
- Spending you may have to make first, before the grant pays out
Set by each program; many cover only part of a project's costs.
Does it fit?
Could fit when
- You plan to invest in a building, equipment or a new site, which state programs often reward with grants or credits
- Your project serves your community
Unlikely to fit when
- You need the money within weeks
Who can use it
- Business types: Sole proprietorship, Partnership, LLC, S corporation, C corporation, Benefit corporation, Cooperative, Nonprofit
- Open to businesses with no sales yet
- A business located, or willing to locate, in the state or area that runs the program
- Commitments the program asks for, such as new full-time jobs or investment
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all grants, tax credits and prizes
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- Jobs and investment plan
- Project costs
- Financial statements
Regulation and protections
Regulators: No regulator for the finance itself.
Who runs it: State or local program.
Grants are not loans, so lending rules do not apply. Each program's own rules, in its guidelines and award agreement, set what you must do and when the money must be paid back. The FTC takes action against grant scams.
Rules that differ by state
- California: California's Governor's Office of Business and Economic Development (GO-Biz) runs the California Competes program, which offers a tax credit, judged on 14 factors including full-time jobs and investment, and a grant program; and the California Grants Portal lists state grants open to businesses. For 2026 to 2027, tax credit applications are taken from January 4 to 25 and March 1 to 15, 2027. (California GO-Biz: California Competes Tax Credit (and California Competes Grant resources); California Grants Portal)
Types of provider: State economic development agencies; County and city economic development offices.
Also consider
What has changed
No changes since this page was published. It was last checked against its sources on October 20, 2026.
Sources
- USA.gov: How to start and fund your own business (no federal grants for starting a business) · checked October 20, 2026
- USA.gov: Government grants and loans · checked October 20, 2026
- SBA: Grants (SBA does not provide grants for starting and expanding a business) · checked October 20, 2026
- FTC: Government grant scams · checked October 20, 2026
Something wrong or out of date?
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