In spite of the best efforts of educators, consultants, and the government, the belief that there is a pot of money available to tap into to start your dream business continues to circulate primarily because of hype advertising in newspapers, magazines, and television infomercials. For most of us the tantalizing idea that there is free money waiting to be claimed seems worth the $10-$50 the 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 private sources.
“Free Government Money” sounds too good to be true and quite honestly it is. Do government grants exist? Yes, but contrary to all the misinformation and hype, government grants are difficult if not impossible for most entrepreneurs to get. In the following pages the truth about what governments grants really are, where they’re available, who is eligible, and how they are awarded will be explained in plain English.
What is a grant?
Simply put, a grant is a loan that does not have to be paid back. It is like a loan because the money is almost always given on the “condition” that something specific will be done within a specified time or the grant is canceled and if monies were advanced they must be paid back.
Example: Student grants are normally given under the condition that the student completes the term or course(s) in the manner, time, and/or by the rules spelled out in the grant agreement. These rules or “strings” as they are often called give the granting agency or administrative person 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 legitimate 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 a limited number of grant programs, these are generally designed to expand and enhance organizations that provide small business management, technical, or financial assistance. These grants generally support non-profit organizations, intermediary lending institutions, and state and local government economic development efforts.
Based on a thorough search of federal grant programs, the few direct business assistance grants available at this time are for businesses developing new products, services, or technology in the areas of national defense, homeland security, environmental technologies, medical research, veterans assistance, and economic development within Native American and Alaskan Indian tribes. With a very few exceptions, there are currently no government grant programs providing direct monetary assistance to the general public for startup or expansion of traditional “for-profit” types of businesses. Diane Howerton, Director of the U/C Merced Small Business Development Center Regional Network states, “the grant we receive annually from the SBA is used to partially fund five local SBDC centers within our 15 county region. This grant money can only be used to further enable the centers to provide free counseling and low-cost training services to emerging and existing small businesses and cannot be used as direct payments, loans, or subsidies to private persons or business entities.”
But the Internet is full of grants…who are these for?
When you read the details on most government grants you will notice that eligibility is the key. Eligible applicants for most grants are limited to government or non-profit organizations. In most cases this means state or 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 many require other matching funds. This means the recipient must compete for a limited pool of funds with many other applicants, do something required by the grant provider, and possibly even match any grant dollars awarded with other sources of funding. 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 challenge stated outcomes. It is possible that a negative final review by the grant provider could nullify all or part of the funding. This means that monies received from the grant may need to be paid back or the applicant’s own money spent in advance of receiving expected funding might not be reimbursed.
For many, the regulations and “paper work” surrounding most grants seems irrational, excessive, and much too restrictive. Speaking in defense of the bureaucracy, when these are public funds derived from taxpayers it stands to reason that there must be some method of accountability and oversight to ensure that the grants are used in a proper manner to create a public benefit.
Although everything said thus far may sound negatively bias towards grant funding it is meant to be a sober assessment of the challenges and difficulties associated with trying to fund your business through grants. Many states, cities, and local communities throughout the country offer mini-grants and low-interest micro-loans to assist business, as do some chambers of commerce and business associations. Check with your local SBDC office, economic development department, or chamber to see what local grants and/or loans are available in your area. If you find a grant just be sure to understand it completely before applying and accepting funds.
Aren’t there private foundation and corporate Grants?
Yes, there are many different types of non-government grants. However, the eligibility for most is 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, SCORE, your local public library, or your city, county, or state department of economic development.
“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 and could be very lengthy. There are many good websites that offer advice and grant writing assistance as well as many persons in your general area 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 and sometimes they lure the business owner in with unrealistic promises and incremental payments. Many of the most visible “Grant” companies have complicated contracts that are filled with conditions and clauses most people don’t read or cannot meet. In some cases, even if they find you a grant and you refuse to accept it for whatever reason, you are still required to pay their fees.
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 grant 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: www.ca.gov/Grants.htm
Private and 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. One example is: www.proposalwriter.com (offered only as an example. This is not an endorsement of this website and its contents)
Internet articles on Grants
There are many articles online concerning grants some are excellent and some are misleading or even outright fraudulent. One good example can be found at www.home-business-savvy.com/home-business-grants.html
We hope you find this grant information useful and we sincerely wish you great success in your future business endeavors.
This article is provided for informational purposes only and is neither an implied or expressed endorsement of products or services found on any website provided in this article.