(I originally published this article in the Galion Inquirer on Dec. 21, 2011)
You have probably heard that there is free money out there to be given away to small business owners to spend however they want. This is not necessarily true—most small business owners obtain financing through loans and their own personal funds. As a matter of fact, at this time, Congress has not set aside any monies for grants to specifically start and/or expand a small business.
The biggest problem most businesses face when attempting to raise grant money is actually finding the money that’s available from the government or various charitable foundations.
Even if you can’t get grant money for small business startup or expansion from the federal government, there are other avenues worth investigating as a source of funds.
The difference between a grant and a loan is that a grant is essentially “free money” that does not have to be paid back. A loan is “borrowed” money that will need to be repaid, often with interest. The government’s grant program is very limited and described more below. The government’s loan program is through the Small Business Administration (SBA). SBA loans are guaranteed loans made through local lenders.
While grants provide money that does not have to be repaid, they often require the recipient to provide matching funds. For example, you may need to come up with $10,000 before the grantor will give an additional $10,000.
Grants all have different requirements for eligibility. However, the majority of grants are given by community foundations to groups of people who are looking for money to support a good cause. Examples may be scientific or medical research, social service or philanthropic organizations, educational institutions, or religious organizations.
The Small Business Innovative Research Program is one of the federal government’s grant programs. It focuses on research and development for the commercial sector. You can find their website at http://www.sbir.gov/.
Another good place to start looking for grant information is The Catalog of Federal Domestic Assistance at https://www.cfda.gov/. The CFDA is a government-wide listing of federal programs, projects, and services that provide assistance or benefits to the American public. It contains financial and non-financial assistance programs administered by most departments and establishments of the federal government.
In order to receive grant funding, your organization usually has to be structured as a non-profit, with tax-exempt status. See IRS publication #557 for details on obtaining such status.
Most grants originate from charitable or community foundations. Start with a search at http://www.foundationcenter.org/. They list over 200 community foundations in their database.
For any grant or loan, you will usually need to write a grant response (similar to a business plan) or proposal. Any lender or grantor will want to know the reasons why they should give or lend you money. Most Small Business Development Centers offer free counseling services to give guidance in writing a business plan or advice on writing a proposal. We’re fortunate to have two of them in this area. One is in Mansfield, and one is in Marion. To find your nearest SBDC, go to http://www.asbdc-us.org/.
The Internet is full of many misleading opportunities. Be cautious, and make sure that the organization or company has a professionally developed web site. Also, make sure they have a phone number, email address and physical address. You should not be required to pay to apply for a grant, although some legitimate web sites sell access to their directory of opportunities for a monthly fee.
When applying for small business grants, make sure to be thorough and complete. Most opportunities will require very lengthy applications. Follow their instructions exactly. Being inaccurate or skipping questions may disqualify you.
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