Bigfoot ... the Yeti … the Chupacabra … the Loch Ness Monster … the Government Small Business Grant.
Each is a myth, a flight of fancy, an expression of wishful thinking, a figment of someone’s runaway imagination.
Of course, people can be forgiven for believing in such folklore. We humans seem to have a genetic gullibility when it comes to monsters and money.
But no matter how many people insist otherwise, no matter how much we want them to be real, these things simply don’t exist. It’s time to face facts and move on.
That’s especially true if you’re a budding entrepreneur and you’re nurturing the irrational hope that there’s a government office willing to just give you money, no strings attached, to bankroll your business. Not gonna happen. You have a better chance of finding Bigfoot and a Yeti swimming with Nessie in your bathtub.
But what about all those websites that say federal and state governments have billions of dollars in business grants lying around just waiting for an enterprising person like you to come in and vacuum up your share? They’re trying to sell you something – databases, software, guide books and the like – most all of it misleading and useless.
The TV, radio and Internet hucksters that traffic in this stuff follow a predictable formula. They tell you that:
There are hundreds of billions of dollars available for free.
That most people don’t even know these “hidden” grants exist.
That their products (which usually cost between $50 and $100) will reveal all the closely guarded secrets of the government business grant universe and can help you identify and get “your share.”
Don’t buy a word of it, not even a syllable. Most all of those offers are combination of nonsense, rubbish and built on false implications. They tend to use the word “grant” to describe any kind of payment from the government. Most of the “hidden government money” they identify comes from public assistance for low-income families, the elderly or the disabled. These are largely entitlement programs, not competitive grants. And they’ve got nothing to do with business financing.
True, some small businesses engaged in scientific research and development can qualify for federal grants from the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. But they must be established companies (not startups) that have projects that meet federal R&D objectives and have high potential for commercialization.
Here’s the reality for most start-ups looking for cash: When it comes to financial assistance programs for small business, both the state and federal government lean heavily on programs that have some sort of shared contribution.
Usually that means federally backed SBA loans with favorable terms and interest rates. It also means that you’ll have to bring some of your own money to the table to get the loan. You can use SBA loans for lots of things -- to cover start-up costs, buy equipment or inventory, or provide working capital.
Over the next couple installments of Minnesota Business 101, we’ll look at a few different financing options for starting a business, from working with banks and other commercial lending institutions to borrowing capital from family, friends or investors.
And as you’re pondering the ways to finance your own venture, be wary of grant scams. There’s no free lunch – and there’s no free lunch money.
Consultants at our Small Business Assistance Office can help you understand more about financing your business. And our network of Small Business Development Centers has experts located in nine main regional offices and several satellite centers statewide.
For a deeper look into business finance, see our Guide to Starting a Business in Minnesota. Available for download in PDF, formatted for e-readers, or available in print (all free of charge), the book covers the major issues, questions and concerns about business startups.
To help you identify what government financing programs may be available to help you start or expand your business, check out the “Access Financing” Wizard from BusinessUSA.
Finally, nothing we cover in this blog should be taken as legal advice. It’s not. And it’s no substitute for the professional guidance of a lawyer or accountant.
Get a quick overview of the U.S. Small Business Administration's most popular loan program, commonly known as the 7(a) loan.