Contact Info.

Brian McClain
Director

Telephone
936-633-5400

FAX
936-633-5478

Address
Angelina College SBDC
3500 South First Street
Lufkin, Texas  75902

Grants for Small Business

Myths versus Reality

By Jim Parrish, Management Consultant
USF Small Business Development Center
3/8/04©

So, you are looking for a grant to start or grow your business. You know that there is an abundance of money out there just waiting for you. You know this because your friends tell you so, the media tells you so, books tell you that all you need to do is just ask for your check, and infomercials bombard you with the message that anyone can get a business grant. Maybe, you attended a seminar where you were told that this is true and in order to find these grants all you have to do is buy their books, tapes, and/or consulting services. How probable is it that you can find a grant for your business? Is what you know the whole truth, the partial truth, or a myth?

The answer to these questions is that there is a kernel of truth in what you have been told; enough of it is true so that the source does not risk serious legal liability. However read and listen closely to their words. Although they give the impression that these business grants are available in great abundance and are yours for the asking, the whole truth is that they have many restrictions. In the last six years, I have assisted 2,155 clients in finding money for their businesses. Only 22 (1%) of those clients received a business grant and almost all of them received their grants from a state of Florida program that is available only to the disabled and Native Americans. In my nine years of business counseling, I am not aware of anyone who ever received a business grant from any source they directly identified upon buying a book, watching an infomercial, or paying a grant consultant. So, what are the common myths and realities? Are there any grants available for your business?

Grants for Minorities, Veterans, and Women Owned Businesses

One of our most frequently asked questions is "where are the grants for minorities, veterans, and women to start a business"? A common myth is - if you are a member of one of these groups, then free money to start a business is out there for you. All you have to do is ask for it! What is the reality? The kernel of truth is that as a member of one of these groups you are not excluded from grant consideration. Scattered across the United States, there are a few grant programs that give small amounts of money (usually less that $2,000) to members of one of these groups who wish to start a business. However, these programs always have many other restrictions. Why, because no organization, including the federal government, has enough money to fund the potentially large number of requests. Based upon the 2000 census, over 150 million adults are a member of one of these groups. A recent infomercial claimed that "any member of one of these groups can get a $9,000 grant to start a business. If true, then 1.3 trillion dollars would potentially be needed to fund grants to members of these groups. That amount is approximately 60% of the Medicaid, and the Department of Defense.

Most of the books, tapes, CDs, and infomercials on finding free money use the Catalogue of Federal Domestic Assistance as their source material. This catalogue is over 1,500 pages and includes all domestic spending programs, not just grant programs. So, the authors condense the information and then sell it to you. However, that catalogue is available on-line for free at www.cfda.gov. Even this on-line version is extremely cumbersome to navigate and is difficult to understand. That is why the federal government recently created an on-line federal grant search engine. This grant search engine is available for free at www.grants.gov.

Currently, we are not aware of any local or state grants for members of these groups. However, occasionally local women and/or minority organizations may sponsor grants for individuals in specific circumstances. For example, a few years ago the Women's Resource Center in Sarasota had a grant program for recently divorced moms and young kids who wanted to work at home. In that instance, they would consider, if needy, providing a grant up to $1,000 to help them get started. Although we are not aware of any local or state organizations that provide these grants today, you might consider asking the local women, minority, and/or veteran organizations. If you find any organizations that do provide these type grants, please let us know so we can make the information available to our other clients.

Grants for the Disabled and Native Americans

Common knowledge says that there is free money available for the disabled and/or Native Americans to start or expand a business. The reality is that although some Indian tribes do have grant programs, they are usually reserved for tribal members living on a reservation. In addition, almost all of the grant programs foe the disabled go to assistance providers rather than to a business. However, the state of Florida does have a business grant program for the disabled and/or Native Americans to start or expand their business. As mentioned in the introduction to this article, the USF SBDC has had a number of its clients receive one of these grants. The state's primary purpose for these grants is to help the disabled and Native Americans become self sufficient and thereby get off of public assistance. For information, contact a counselor at your local office of the Division of Vocational Rehabilitation, Department of Education. You can find the location of the local office in the telephone directory or through www.myflorida.com.

Research and Development Grants

The federal government does require its agencies to make research and development grants available to small businesses. Two of these programs are the Small Business Innovative Research (SBIR) grant program.

The SBIR is a highly competitive grant program. It provides research and development funds for the commercialization of high-tech products. To be eligible the small business must be: American-owned and independently operated, a for-profit business with less that 500 employees and the principal research must be employed by business. Each year ten federal departments and agencies are required to reserve a portion of their R&D grants for small business. These grants award up to $100,000 for approx. 6 months to support the exploration of the feasibility and merit of the technology. In the next phase, grants are awarded up to $750,000 for up to 2 years to perform the $&D and evaluate the commercialization potential of the technology.

The STTR program is very similar to the SBIR program except that the principal researcher is employed by a non-profit research institution rather than the business. Other differences are the first phase grant of up to $100,000 may be for up to one year instead of six months and the second phase grants are up to $500,000 instead of $750,000.

You can find a list of Requests for Proposals at the Website of each federal agency. A link to those agencies that issue small business grants can be found at the Small Business Administration's website, www.sba.gov. For a list of the federal departments and agencies that provide SBIR/STTR grants and for additional information, refer to the SBA website at www.sga.gov/sbir. However, you will probably find it easier to find a federal government grant for which your business may qualify at the www.grants.gov website.

Foundation Grants

Yahoo has an on-line directory of foundations that provide grants. Although these grants usually go to not-for-profit organizations for philanthropic work, sometimes they do go to for-profit businesses. For further information on these and the type of work they support, go to: http://dir.yahoo.com/society_and_culture/issues_and_causes/philanthropy/organizations/grant_making_foundations. 

Other Grant Resources

A free on-line list of business grants from non-government sources can be found at the Idea Café Grant Center. This is a bulletin board at a website for business owners. They ask their members to post any grants that they hear about on the bulletin board. You do have to register but there are no fees. Their address is www.businessownersideacafe.com. 

There are many fee-based on-line search engines such as www.grantselect.com that claim to match your needs to a possible grant source. There database includes many different types of grants, some of which are available to small businesses. However, be very careful and spend your money wisely. Rarely do small businesses find grants through one of these matching services due to the reasons previously discussed.

Conclusion

When searching for business grants, you start out with one basic question. Who cares about what I am doing so much that they will give me "free" money? In order to get one of these grants, your business venture must provide the solution to some major problem or need identified by government and/or foundations.