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Steve Windhaus Ask the Small Biz Adviser

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.

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.

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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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