The funny-looking man on television with question marks all over his suit was at it again this month. We had a fresh rash of calls and letters all asking the same thing: “Where can we get free money to start a business?” During his commercial, Question Mark Guy (we’ll call him QMG) holds a book and declares that the government is giving away lots of money to start a business or to pay your living expenses while you launch your business. The letters we receive all say the same thing because they are a form letter recommended in the book. People are paying $600 - $800 for a book, a seminar and maybe a video tape telling them to write to agencies like the Fort Worth Business Assistance Center to ask for “free money” to start a business.
Let’s be perfectly clear: THERE IS NO GOVERNMENT GRANT MONEY AVAILABLE FOR STARTING A BUSINESS. The ONLY government money available for small business is for:
Guaranteeing small business loans. The U.S. Small Business Administration (SBA) guarantees loans through SBA-certified banks. You must meet the bank’s loan criteria, including a 15 – 25% cash down payment, credit worthiness and a realistic business plan to qualify for an interest-bearing, SBA-guaranteed loan. The loans come from the bank and are guaranteed by the government. They are not government loans, much less government grants.
Small Business Innovative Research and Small Business Technology Transfer contracts. SBIR’s/STTR’s are contracts between small businesses and 10 federal government agencies to develop technology for a specific need within the agency. You can find detailed information on the SBIR/STTR program at www.sbaonline.sba.gov/sbir/. Examples of the technology developed under these contracts are: High Speed Holographic Recorder, Dynamic Polymer Composite Connector, Compact Anti-Jamming GPS Antennas. Funds are disbursed by the government agency to the business in stages as the technology is developed, proven and delivered. Not exactly money for nothing.
Apparently, Question Mark Guy’s book lists government grants and recipients. But what QMG and his book don’t tell you are the stipulations for receiving grants.
Most grants require a non-profit 501(c)3 or (c)(6) tax exempt status approved by the IRS;
Grant funds go to organizations, not individuals. Non-profit corporations do not have owners or shareholders; they are governed by a volunteer Board of Directors who have the authority to set policy for the organization. Non-profits’ records are made public—their tax returns are filed with both the IRS and the state in which they are organized. Anyone may request the records of a non-profit’s funding sources and how their funds are spent.
Many organizations compete for limited funds. Grant applications take time to research and write. You must be able to demonstrate that your organization has the capacity and resources to deliver the service required by the funding source, much like a business plan for a loan application.
Government grants require extensive record keeping and reporting. You must achieve the results you predicted in the application or the money can be withdrawn.