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Debunking the business-grant myth
Dear Small Biz
Adviser:
I am trying to find small-business grants. I am a Gulf War vet with
no personal financial resources, yet I have three different opportunities
to own or buy into a small business. I have been told there are
many grants out there that I qualify for, but I hit a brick wall
searching for them. Everywhere I have looked I have to buy a book
to get the information. Thank you in advance for any advice you
have for me.
Peter
Dear Peter:
Inquiries about business grants are among the most enduring received
by Bankrate. I have frequently written about this topic, so I usually
ignore these questions because the answers are the same. Basically,
the promise of free
money to start a business is a myth.
However, given your background and the persistence
of Bankrate Small Biz readers in searching for grant money, I'll
take the time to respond once again.
As you note, many advertisements about grant money
are promoted in a manner that can be misleading. Yes, there are
grants out there and several are directed to business enterprises,
but you must understand the nature of these grants: the sources,
qualifications, uses of grant proceeds and where you can learn more
about them without having to buy a book.
Writing these grant columns, I am reminded of an advertisement
in which a person indicated having gotten money to go to school.
She indicated that if she could accomplish that, then anyone could.
That simply is not true. She was referring to student loans. Not
everybody can get a student loan. There are requirements, and not
everybody qualifies.
Grant research sites
Let me first discuss some of the reliable Web sites where you can
learn details about grants.
The Catalog of Federal
Domestic Assistance is the federal government's grandfather
of all Web sites, leading you to every federal assistance program,
including grants. Simply be patient, follow the instructions in
your search, and you will find all assistance programs, not just
grants.
The Economic
Development Administration of the U.S. Department of Commerce
directs its activities to economically depressed areas, creating
jobs and retaining existing jobs with a series of grant programs.
However, its funding is directed to government agencies, economic
development corporations and other nonprofit groups that submit
proposals that parallel the mission of the EDA.
One of my favorite Web sites is the grants
and free money page of the Small Business Development Center
at the University of Wisconsin, Green Bay. This examination makes
no bones of the business-grants issue.
Understanding grant specifics
Once you have a good overview of grant programs, take a closer look
at some of these funding options, what is offered and what is required
of the applicant.
The Small Business
Innovation Research Grant is widely publicized. A three-phase
grant program, its funds are directed to prototype development,
testing and initial marketing activities. It is offered through
various federal agencies, including the Department of Agriculture,
Department of Defense and NASA.
The General Services Administration's Office
of Enterprise Development offers counseling services to small
businesses, with emphasis on minority and women-owned ventures.
This program is listed as a grant at some Web sites, but in reality
it is counseling, not the disbursement of funds. In short, the program
promotes small businesses becoming vendors to the GSA.
Small Business Development Centers, SCORE, Women's
Business Centers, Minority Business Development Centers, SBA loan
programs and other federal business assistance programs will be
found in the potpourri of so-called federal business grants. Just
look at the SBA's federal
grant resources page.
The well-known Community
Development Block Grants from the Department of Housing are
directed to economically depressed communities, and the recipients
are typically nonprofit, community development corporations.
One of the most popular grants is offered by the National
Association of Workforce Development Boards. Through the U.S.
Department of Labor, funds are provided to reimburse qualified employers
for providing on-the-job training to qualified job applicants. A
portion of the wages earned by that employee during his or her training
on the job will be reimbursed to the employer.
Be aware that any grant that actually includes the
transfer of funds will be very demanding on the recipient to maintain
accurate records that substantiate required milestones associated
with the nature of the grant.
So, Peter, save your money and don't buy a book on
grants. The federal government provides bountiful information about
this financing option at several Web sites.
As for the grant money itself, I think you need to
consider a more traditional source of proceeds, such as a bank or
other commercial lender.
I wish you well.
-- Posted: Sept. 5, 2002
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