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The Truth About
Government Grants |
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"Where
can I get a small business grant?" is the single most common request
asked by small business owners. And the answer is probably the single most
frustrating one an entrepreneur hears, but here it goes, because it is worth
repeating: Federal and state government
agencies do not provide grants for starting a business, paying off debt, or
to cover operating expenses. Government agencies do not provide
"special" grants for women, minorities, veterans or disabled
entrepreneurs. The Federal government also does not provide grants to small
business owners as part of the Recovery Act.
Because there are lots of people telling you
these grants exist in order to sell you something. As my colleague wrote a few months ago, any one
who promises you that you can obtain a small business grant from the
government by subscribing to a book, CD or website, is scamming you. Save
your money.
SBA does not provide grants to small
businesses. In fact, SBA does not lend money. SBA provides a guaranty on
loans made through commercial lenders. This guaranty means that the SBA
assumes a percentage of the financial risk if a borrower defaults on the
loan. Commercial lenders are inclined to provide SBA backed loans to small business
owners who otherwise would not qualify for traditional loan programs. But the government does give out grants,
right? Yes, but these grants are generally only
available to non-profits, educational institutions, associations and state
and local government agencies. Government grants cover a wide range of
activities, from agriculture production to zoological research. Eligibility for a grant varies according to
its purpose and use. For profit businesses may be eligible for some grants,
but rarely are these available to small businesses, and they are never
available to cover start up costs, debt and operating expenses. For example, the U.S. Forest Service provides grants that aid forest restoration
activities. As you can see from grant announcements, a number of
organizations are eligible, including for-profit organizations, except for
small businesses. If you are small technology company, there is
a Federal grant program for you. The Federal government's SBIR (Small
Business Innovation Research) and STTR (Small Business Technology Transfer)
programs award a specific percentage of Federal R&D funds to qualified
small businesses. SBIR/STTR programs encourage small firms to undertake
scientific research that helps the government meet it’s
R&D objectives, and that have a good chance of being commercialized. Grants are not “free money”
For example, one of the few small business
grants I found is the Vermont Technical Assistance Grant.
Its purpose is to provide funding to help existing technology businesses
develop new products, and provides very specific conditions on how the money
should be spent. Likewise, the State of Grants in a Nutshell So, here’s the truth about government grants
in nutshell: 1.
There are no government grants for starting a business, paying
debt or covering operating expenses. For these funding needs, you should seek
a small business loan. 2.
If you are eligible for government grant, you should be aware of
specific terms and conditions of the proceeds. Grants are not "free
money" and often the government expects some return on its investment:
either indirectly through improvement in regional economies; or directly
through the development of technology the government can use in its programs
and services. Locating Grant Announcements There are two primary resources for seeking
information on available grants:
For general information, visit Business.gov’s Guide to Government Grants. |
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