Grants For Starting A Business
So you have this killer idea, and now you need some startup cash. Sure, there's your VISA card, but maxing out your card will clobber your credit rating and saddle you with high-interest debt that will come well before your baby is generating profits. Where do you turn to find free startup capital for your new enterprise?
Americans love the idea of successful small businesses. We love Mom and Pop success stories. We embrace innovation and progress. We believe that the future of personal and national financial success lies in entrepreneurship. We celebrate companies that start out in a garage and earn a national reputation.
Starting a business, of course, is a lot harder than some people would like to think. You need a great idea; you need time and energy and skill. A little luck helps, and most of all you need money. You will almost always need at least some startup capital, and finding it is rarely easy.
Investors and Loans
The two most traditional ways to get financing are to find investors or to borrow. Anyone who has watched the popular TV show “Shark Tank” knows how angel investors work. You pitch your idea, they see potential, and they give you money, right? Well, not quite. Angel investors aren't angels. They are out to make money. They aren't giving you money. They are buying a share in your company, which means that your investors are also part owners and have some control over the enterprise. Angel investors also seek out ideas that have the potential for expansion. They want something that can get big, which will allow them to sell their stake at a profit. If you are looking to build a family concern that's aimed at supporting you, not going nationwide, angel investors will be hard to attract.
The other common option is a loan. The advantage of loans is that you retain full control. The disadvantage is that you have to pay them back, with interest, and payments may begin before your business is profitable. They are also not easy to get. Some government-subsidized loans are available, mainly through the Small Business Administration, but competition is intense. Banks often turn down business loans, especially if the borrower's credit is less than ideal. Online lending is a popular option, but read the fine print carefully. Better yet, consult a lawyer, because many of these loans turn out to be close to predatory. If you are not knowledgeable and well informed, you might find yourself swimming in a different kind of shark tank!
If you can't find an angel investor and a loan is unavailable or too risky, what's left?
The Grant Option
Yes, business grants are real. There is free money out there waiting for an entrepreneur like you to grab it. The problem is there's not a lot of it, and there's a lot of competition for the money that is out there. Grants are harder to find than loans, and many of them require the business owner to add capital. Federal government programs providing startup capital for startups are almost non-existent. Beware of websites claiming that they can get you federal money, especially if they are not .gov sites. There are scams out there.
The Federal Government does give away grants. It gives away lots of them, which you can find on www.grants.gov
. Most of that money goes to organizations, state, and local governments. It may go to universities, charities, or the United Nations, but the Feds don't give a lot of money to people like you and me to fund our dreams. The government's Small Business Administration focuses on loans.
Some government money is available to businesses that are exploring cutting edge ideas that the government might see as real advances. If you've designed a new engine, airplane, spaceship, or energy source, then you should check out possible support from these agencies:
Small Business Innovation Research Program
National Science Foundation
National Institutes of Health
Dept. of Energy
Dept. of Defense
There's quite a few more of them, and they all have one thing in common. You need a killer new technology that can wow them in accomplishing their mandated objective. If you have some super cool way to stop counterfeiting, or secure the nation's borders, or save the spotted yellow tuna, they are probably interested. For those of us who want to open a restaurant or a hardware store or a music shop, opportunities are a lot more limited.
The federal government gives a lot of money to the states, which in turn spend it on their agendas, which may include growing new businesses. State government programs tend to focus on areas that the government sees as priorities, which may change after elections. That's likely to include sectors like child care, agriculture, clean water, or tourism. They also tend to use a matching fund system, so you would have to cough up as much money as you are hoping to score. Each of the following state departments has counterparts in other states.
STEP Programs (State Trade and Export Promotion) support export-ready concerns. There are STEP programs in many states, like DC STEP, Idaho STEP, etc.
REM Programs (Recycling, Expansion, and Modernization) are interested in ideas related to recycling and waste management.
Illinois Recycling Expansion and Modernization Program
Kansas Attraction Development Grants support in tourism-based enterprises in Kansas.
Maryland Economic Development Assistance Authority & Fund has many programs available.
Minnesota Retaining Early Educators Through Attaining Incentives support childcare businesses.
Minnesota Emerald Ash Borer Community Preparedness Forest Protection Reserve Appropriation is interested in pest control and environmental enterprises.
Nebraska Child Care Grants support childcare facilities and businesses.
North Carolina IDEA supports innovative high-tech ideas.
The best way to find support programs in your state is to fire up Google and start searching. Don't let your expectations get too high, but it never hurts to look.