Rachael

A: I would have to say, I get more variations on this question than any other: “Where the heck can I get some of this free government startup money?”

I’m not exactly sure where this urban myth comes from, this idea that there are government agencies out there just waiting to give out free money to start a business.

I suspect that the main culprit is Matthew Lesko. You know, the wacky guy on those infomercials with the question mark suit who is always talking about free government grants and programs.

Do they really exist? Are there free federal grant dollars available to fund a business startup? Let’s find out.

Lesko received his MBA from American University and his company, Information USA, has published many books on the subject of “free” government programs over the past few decades. His books generally point out programs that people may or may not know about which offer some sort of assistance – everything from Medicare and Medicaid to SBA loans, energy assistance, and farm subsidies.

But actual free money turns out to be a pretty rare thing.

Indeed, the York State Consumer Protection Board issued a report in 2004 stating that some of Lesko’s claims of free money are exaggerated (in relation to his book, Free Money to Pay Your Bills.)

This is not to say that grants are not available on the federal level. They are. Indeed, the federal budget is chock-full of programs that grant funds for such things as:

* Scientific research
* Educational endeavors
* Defense services and products, etc.

Moreover, there are plenty of programs that help minority, veteran, women, and disabled business owners, but again, none that I could find offer actual free start-up capital for individuals. Most of this assistance is technical and advisory in nature.

When the federal government does offer grant money to promote small business, it almost exclusively goes to state and local governments. According to the smart folks over at About.com, “By far, most government grants are applied for and awarded to other federal agencies, states, cities, colleges and universities, and research organizations.”

So it seems that free federal money to start a business is more myth than fact.

Next then, let’s consider programs on the state and local level. Here we find a bit more help. For instance, many communities offer incentives for small businesses to set up shop in economically distressed areas, although these incentives often take the forms of tax breaks or rent subsidies rather than grants per se. There are also plenty of incentives today to make your business greener, but again no, no free money.

What about private, non-profit grant makers? These are organizations with very specific goals in mind, who work hard at fund-raising, and who fund only the most worthy, cost-effective programs. Some may help with business capital if that is the business they are in and you meet their very specific criteria and stringent prerequisites. No one gives money away willy-nilly. Expect to be thoroughly vetted to make sure that what you are proposing is what they want you to be doing.

Expect to also spend a lot of time and effort in the process. Applying for and getting grants is a difficult, rigorous process, often requiring expert assistance. “Grant writer” is a job for a reason.

And understand this too: Grants come with strings. In the remote chance that you do find and get a business grant, you will also be expected to thoroughly account for whatever money you get and spend it exactly in accordance with the strict guidelines of the grant maker. Failure to do so will land you in plenty of legal hot water.

At a time of huge federal government deficits, an incredibly expensive war with no end in sight, and recession, you are looking for free government money? Think again.

If it sounds too good to be true, it probably is.

Today’s Tip: One place to find out what state and local assistance is available to your business is the online Catalog of Federal Domestic Assistance; a database of all federal programs available to state and local governments, organizations, various groups, and individuals. Once you locate a program that may be a fit, contact the office that administers the program and learn about the application process.

Capital: The Key to Starting a Successful Home Business

Government Grants

You can get a government grant for your business if you meet the criteria. Often, women and single parents can get these types of grants more easily. Also, if you’re in a minority group, you may have a better chance of getting a government grant. They are not easy to get, and finding information on them is harder. However, if you’re able to get one, often, you never have to pay this money back. It is designed specifically to help fund small businesses. One great online resource to look for government grants is the Small Business Administration website, where there are many sources and information on government grants. See more information below on how the SBA can help you.

State Small Business Grants

There are actually many small business grants available on the state level. These grants can help provide start up funding for your business, provide funds to purchase necessary equipment or supplies, and even help you find a building to open your business in. These can be very helpful if you meet the criteria for the grants. It’s actually quite easy to find information on these types of grants, just by doing a state relevant search on the internet.

Small Business Administration

The government, through the Small Business Administration, or SBA, is providing some very useful loans. You can get low interest, long-term loans that will provide start up funding for your business, or expansion money. There is no application fee for small businesses, and there is an interest rate cap so you are assured that your interest rates will never go over a certain amount. There is no bank management fee either. You will need to include a few things for your application though. Some of the things that the SBA requires are a business profile and a statement of how much money you need and what it will be used for.

If at all possible, small businesses should try to get a grant rather than a business loan. Grants are monies that usually never have to be paid back. In fact, money is allocated each year for grants, and often, all of the money allocated isn’t used. This can be a life saver for a small business that is struggling or just starting out. If you’re able to get a grant, you don’t have to worry about loan payments, etc.

If you are not able to get a grant, a small business loan can be very helpful as well. Although you do have to pay it back, you can get low interest loans and small payments. The good thing about loans that are paid off on time is that next time you need a loan for whatever reason; it will be easier to get one.

There are many different government resources for small and large businesses. Use the information above to point you in the right direction for your business needs.