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Where Are The Grants to Fund My Start-up Business?

By Kerry Woodson

One of the most common occurrences at the Small Business Development Center is people inquiring about government grants for their businesses. They have seen the ads on TV or the internet and have high hopes and expectations that the government is handing out tens of thousands of dollars (or more) to anyone wanting to start a business. It's bad to be the bearer of bad news, but you probably need to develop another plan for funding your business because government grants for starting a normal, for-profit business are virtually nonexistent.

Now that your bubble has been completely burst, please don't shoot the messenger. It's not that there is no such thing as a government grant or that nobody has ever received such a gift - it's just that we at the SBDC have never seen anyone actually get one. In addition, there was an interview on MSNBC with the head of a nation-wide government-funded business counseling organization in which he said he had not seen any clients get a grant in his 17 years with the group. Those results don't provide great confidence that pursuing a grant is a viable funding mechanism in a for-profit endeavor. Please note the distinction about profit. Educational institutions and other nonprofit and research initiatives are in a different category and not the subject here.

We have been bombarded by all the talk about multi-billion dollar stimulus packages and the importance of small businesses. We've even seen pictures of people holding checks supposedly of the grant they received and who, for a small fee, will share information with you about how to get yours as well. Maybe someone receives a phone call from a person offering to write a grant request, guaranteeing an award of XX amount after you send them $2000 or more to do the paperwork. My question is if they really had free money to give away, would they have to be calling strangers to find people to take it? Probably not. The best advice is to run from all these operations.

So, if you can't get free money to start your business, what are the alternatives? Of course, the starting point is a solid, viable idea that has a reasonably good chance of being successful, based on an initial feasibility study and adequate market research. If your concept is sound, it's more likely that someone will take a chance on you, putting you in the arena of looking for investors and/or lenders. Friends and family are usually the first place to look because they already know you and lending from financial institutions for startups is very limited. Investors are a possible option but the deal has to be lucrative enough for them to be willing to take the risk, meaning that you will probably have to give up some ownership.

Obtaining capital to start a business is one of the greatest challenges facing entrepreneurs, leading many to hope for a magic-bullet solution in grants. It's unfortunate that the myth is so widely disseminated. The good news is that businesses get started every day so it's not an impossible task - it just means that creativity, diligence, and flexibility are some of the prerequisite characteristics of a successful business owner.

 Thank you to the SBDC at Lone Star College for permission to publish this article.