In spite of the common “if it’s too good to be true…” adage, people still want to believe that there’s a pot of money available somewhere to start their dream business. For many the idea that there is free money waiting to be claimed is worth the $20-$50 the “infomercial hucksters are asking for their “valuable” advice and “comprehensive” books. But in almost every case, the information they sell is available free from a variety of government and non-profit sources. Especially today “Free Government Money” just sounds too good to be true and quite honestly it is. Do government grants exist? Yes, but contrary to all the hype, grants for most entrepreneurs are simply not readily available or difficult to get if they are. This article is intended to provide the truth about government grants, where they’re available, who is eligible, and how they are awarded.
What is a grant?
Simply put, a grant is like a loan that does not have to be paid back. It is like a loan because the applicant has to fill out an application and meet specific qualifying criteria to be considered for funding. It is almost always given on the condition that the money be used in a specific way and within a specific time or the grant is canceled. These conditions or “strings,” as they are often called, give the granting agency some control over misuse, abuse, or outright fraud of the grant program.
Are there grants available to help businesses?
Yes…but is the usual answer given by most grant experts including the US Small Business Administration, the SBA. As stated on their website, “the SBA does not offer grants to start or expand small businesses, although it does offer a wide variety of loan programs.” While the SBA does offer some grant programs, these are generally designed to support non-profit organizations that provide management, technical innovation. These SBIR and STTR grants are complicated and challenging to get.
Based on a recent search of federal grant programs the few direct business assistance grants available were for existing businesses developing new products, services, or technology in the areas of national defense, homeland security, environmental technologies, medical research, and economic development within certain distressed and economically depressed areas.
As a general “rule of thumb,” there are few if any government grants providing direct monetary assistance for the typical person to start most common types of for-profit businesses.
But the internet is full of government grant offers…who are these for?
When you read the details for most government grants you will notice that eligibility is the key. Eligible applicants for most grants are limited to government, educational institutions or non-profit organizations. In practical terms, this means state of local government agencies, or non-profits who have the pre-existing capacity to assist the grant provider serve its constituents. Most grants of this type are performance based, competitive, and quite often require other matching funds. This means the recipient must do something required by the grant provider, compete with many other applicants for a limited pool of funds, and match any awarded grant dollars with other sources of funding. The vast majority of potential applicants either cannot or chose not to meet these conditions. In most grant programs a large number apply but only a few receive funding.
For many potential recipients the cost of compliance in time, effort, paper work, and frustration is beyond the value gained from the grant. In addition, most grant recipients are required to give the grant provider authorization to review records, practices, and to challenge stated outcomes for several years after the grant ends. It is possible that upon review, the grant provider could nullify all or part of the funding meaning that monies received from the grant may need to be paid back.
For many the bureaucracy and “paper work” surrounding grants seems irrational, excessive and much too restrictive. Speaking in defense of the bureaucracy, since these are, in most cases, public funds derived from taxpayers it stands to reason that there must be some method of accountability and oversight to ensure that the grant funds are used in a proper and legal manner.
Aren’t there private foundation and corporate grants?
Yes, there are many different types of non-governmental grants. However, the eligibility for most is often the same as their government counterparts. The Foundation Center which is one of the largest resource locations for private grant information states on its website, “Foundations typically fund nonprofit organizations that qualify for public charity status under section 501(c)(3) of the Internal Revenue Code. These are organizations whose purposes are charitable, educational, scientific, religious, literary, or cultural.”
By and large, foundations do not make grants to “for-profit” enterprises. If you are trying to start a for-profit business, as opposed to a not-for-profit entity, we recommend that you visit your local Small Business Development Center, the business section of your local public library, or you city, county, or state department of economic development for assistance in understanding any grant funding options.
I still think I can qualify for a grant…where do I go to get help?
If you still believe you can qualify for a grant then the best place to start your quest is through the internet. Remember that once a promising grant is located the application process is almost always challenging, competitive and lengthy. There are many websites that offer excellent advice and grant writing assistance as well as persons who provide fee-based grant writing services. Caution is advised when hiring a professional grant writer. Check references, education, and experience before committing to paid services. Talk to unbiased people who have worked with a potential grant writer to see what their experiences and grant success was. Be extremely cautious of grant writing services that “guarantee” they will get you a grant. Many times these require upfront payment for locating grants that are filled with conditions and clauses most people cannot or refuse to meet. In most cases, if they find you a grant and you refuse to accept it you are still required to pay their fees. Unfortunately, far too many grant assistance programs are out-right scams and should be avoided. Bottom-line is, “do your homework” before writing a check!
There are many websites dedicated to assisting persons or organizations in their quest for grant opportunities. Below is only a partial listing. All of these have a great many additional links that are also good sources of grant information.
Federal Grants: The central search location for all federal grants is www.grants.gov Here you will find information on all federal grants in one location. There is also additional information at www.sba.gov/expanding/grants.html The Catalog of Federal Domestic Assistance, www.cfda.gov lists hundreds of different federal grants programs but none provide unrestricted funds to the general public for the purpose of starting a for-profit business of the type and location of the owner’s choosing. Remember all grants have “Strings”!
State of California: Grants from various state agencies can be located at: http://www.ca.gov/Grants.html
Private/Corporate grants: www.fdncenter.org Lots of information and sources for non-government grants
Commercial Websites: There are hundreds if not thousands of commercial websites devoted to grants and grant writing. Be careful, most charge for their services.
Internet articles on grants: The Dallas Public Library has many excellent articles online concerning grants. One of the very best can be found at http://dallaslibrary.org/CGI/govgrants.htm