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Steve Windhaus Ask the Small Biz Adviser

No free money for startups

Dear Small Biz Adviser
I am looking for information on grants for starting a business. It's an older building in our community that is being remodeled to be reopened as a café. Can you tell me where I can find grants to help buy this?
Thank you.

Dear Deb:
Readers continually ask for information on grants. The inquiries come despite my repeated efforts to get the message out that there are no grants to start a business venture.

If you are listening to advertisements on TV and radio promising free money to new businesses, please pay close attention to what is being said. The ads are worded so that they catch attention, and you need to be very careful when gathering information on these offers.

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The truth is that the U.S. Small Business Administration does not provide grants for the purpose of business startup or expansion. That's clearly stated on the SBA's answers to startup questions Web page. The agency does, however, offer several loan programs. The Small Business Development Center at the University of Wisconsin Green Bay offers additional information to clear up the widespread misconception about free money.

So what funding alternatives are available for startups? Let me offer two for you to consider:

1. A direct commercial or real estate loan, or

2. A joint venture idea that allows you to start the business while creating opportunities for others who live in the area.

The first option is the classic commercial loan application. Put together your business plan, fill out the loan application forms and seek the loan. Get some help from the nearest Small Business Development Center, SCORE chapter, Minority Business Development Center or Women's Business Center.

I urge you to seek the free counseling and guidance of as many of these agencies as possible. Look at it like getting a second doctor's opinion. It gives you a deeper understanding and better preparation for the loan application process.

The loan application may or may not include a purchase of the property. That adds significant collateral. If the building is big enough, you may want to lease out extra space to other business ventures, especially types of ventures that would increase traffic to your café.

The second alternative, a joint venture, is worth considering if the building for your prospective business is located in an economically depressed zone. A nonprofit, community-based organization can apply to purchase the building. I believe there are grants for these situations that would facilitate the venture. You could then entertain leasing space in the building for your café.

A very seldom-mentioned agency is the Economic Development Administration. I consider it the premier federal agency that addresses economic development in economically depressed communities. However, funding focuses on nonprofits as the lead agencies in these communities. You may want to contact a local economic development agency if considering this second alternative.

I sincerely wish you well.

-- Posted: Aug. 28, 2001


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