Startup Squanders #4 -- Grant Seekers And Consultants By K. MacKillop At Isnare.com Ezine Articles

The "grant assistance" industry is booming -- not because they are actually securing any grants for anyone, but because potential entrepreneurs with good business ideas and in need of capital want to believe the hype these scammers are putting out there. In fact, there are NO federal direct grants to help start a domestic business. Also, there are no secrets grants, or any secret to applying for grants that are available. Don't waste your time or money dealing with grant seekers -- at best they are overcharging for a simple job you can do yourself or find free help with, at worst they are just ripping you off.

The federal government does, in fact, release over 500 billion dollars in grant money each year. Unfortunately, it is not aimed at individual Americans. Rather, state and local governments and not-for-profit organizations of all sorts are entitled to apply for those grants that fit with the agency's mission. For example, cash is set aside for small business, but it is distributed to state SBA offices and economic development not-for-profits to use to promote small business in their local areas. The money is then used to fund loan programs or training programs to encourage small business development. Very rarely do NFPs opt to offer grants. This is because by using the federal money for low-interest loans or training they are able to help far more people on the road to entrepreneurship.

Another important fact about grants is that they have significant restrictions on how they can be used. The local economic development NFP cannot do whatever they want with the cash. The legislation behind the grant is typically very specific about how the money can be spent, and they conduct periodic audits to ensure the NFPs are in compliance. Even the few direct grants that are offered by the federal government are extremely restrictive. For example, if you are planning to open a manufacturing facility in the former Soviet Bloc, there may be matching funds available to help you do so. But the cash must be used specifically for building the facility, and not for salaries, marketing, or any other aspect of the business. Basically, the few direct grants available from the federal government are for very specific purposes, most of them overseas business opportunities, frequently require matching funds, and your run-of-the-mill grant seekers do not have any secret access to them.

The SBA (Small Business Administration) gets a significant portion of the small business funding that comes from the federal government. They offer a number of small business loan guarantee programs -- meaning if you are approved, they will promise the bank to secure up to 80% of the amount you need to borrow. Some cash also ends up with local Microloan programs, where well-planned startups can apply for low-interest loans up to $35,000. As with all other SBA programs, the applicant's personal credit will need to be in good shape, and the business plan will have to realistically show the ability to repay the loan. Also, each SBA loan program sets specific uses for the loan proceeds -- one can be used only for working capital, one for only land and building.

If you are concerned about finding funding for your startup idea, don't count on grants. Certainly do not spend what startup capital you do have on the grant finder industry. Save that money, and any other you can scrape together, to actually get your idea launched.

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