Small Biz Startup Grants and Other Tall Tales

woman with money vintageIf you received a robo-call one evening around dinner time and the recorded voice on the other end of the line boasted that there was “free money” available, what would you do?

Most would hang up the phone and go back to the dinner table. The simple fact is that there really isn’t such a thing as free money. However, as I talk to budding entrepreneurs, I occasionally run into some who tell me they plan to start their businesses with grant money.

These conversations always occur before they have actually tried to find and apply for these wonderful grants of free money. Somewhere between 500,000 and a million new businesses get started each year in the United States, so you can see what the competition would be for free money.

But what about…

I know that some of you will protest a little because you know there are businesses that received grants to startup or for expansion. This is true, but the number is very small and the niches within which these grants are divvied out are very narrow.

Let me give you a quote directly from the Small Business Administration’s website:

The federal government does NOT provide grants for starting and expanding a business. 

So cross that possible source off your list. There are some state economic development agencies that will occasionally have some money for special purposes. However, you’ll find that loan programs are overwhelmingly more abundant than grant programs – and even the loans can be difficult to obtain.

Further, grant programs generally require matching funds so they aren’t really “free money” either. The BusinessUSA website has an excellent “financing finder tool” that will give you a very fast idea if you have any chance at grant money. As you work your way through the questions, you’ll quickly realize that only a very narrowly defined group of people and purposes have any chance at grant money. Access to loan guarantees is somewhat more common.

Risk-worthy ideas

There is a very good economic reason for the dearth of small business grants: If your idea is a good one that will turn a profit in the marketplace, there should be someone willing to give you a loan to start your business – or you should be willing to risk your own money.

If neither you, nor a venture capitalist, nor a bank believes your idea is worth taking a risk on, why should taxpayers pony up the money?

I don’t offer this perspective to discourage anyone. In fact, I hope to do the opposite: Develop your business idea so much that its potential for commercial success is undeniable. Then you shouldn’t have any trouble finding money to get you started.

Sponsored by AT&T