||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?
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
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
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
Business Development Center or Women's
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
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