Government Grants

Datafordummies · Site Admin

"Where can I find a government grant or free money?" is one of the most frequently asked start-up questions from shoestring entrepreneurs. The notion that there are millions of dollars in government grants available to start a business is false. Such grants must be approved by Congress and included as part of the annual federal budget signed by the president. Unfortunately, the U.S. government doesn't currently offer any direct grants of money for starting a small business.

There are grants available to small businesses through various federal agencies. However, these grants are typically awarded to existing businesses and are narrow in purpose.

You may have seen ads, infomercials and books that promise to help: "Rake in $1 million per year by getting free grants" or "Milk Uncle Sam's free business grant programs." Ignore them. It's unlikely that these Promised Land products will lead you to a start-up grant source. You'll learn that the majority of available grant money is targeted at nonprofit organizations and government agencies to fund community revitalization, training and education, or research projects, and to individuals for scholarships and financial aid or to fund artistic activities or fellowships.

Government Funding Projects
The broadest category of funding is aimed at promoting "affordable housing." Congress believes housing choices support a thriving commercial sector for communities, so they've created programs to encourage various types of real estate development. The other big category of funding involves stimulating certain kinds of small-business activity in depressed locations.

The largest grants and subsidies come in the form of materials - cost subsidies, rent and mortgage subsidies, reconstruction grants, and super-low-interest loans from the Office of Housing and Urban Development to fix up residential properties in depressed inner-city neighborhoods. The second largest category involves federal support for enterprise zones (also called empowerment zones), where government grants, subsidies and loans are offered to certain minority-owned businesses or companies that will conduct operations in what have typically been unattractive inner-city locations.

The next largest category of government funds is available to businesses that engage in certain types of health-care activities (inner-city clinics, pharmacies), transportation (inner-city or rural mass transit subcontracting), community and regional development (child care, after-school facilities), and educational ventures (job training centers). Congress makes these funds available as an incentive to launch an enterprise that will contribute to the commercial success of economically hard-hit rural and urban areas.

Where To Start Your Research
We recommend you begin your research on government grants at Grants.gov. Grants.gov is a single source for finding and applying for Federal grants online.
It also provides a unified interface for all agencies to announce their grant opportunities, and for all grant applicants to find and apply for those opportunities.

The charter of Grants.gov, one of 24 President’s Management Agenda E-Government initiatives, is to provide a simple, unified electronic storefront for interactions between grant applicants and the Federal agencies that manage grant funds. There are 26 Federal grant-making agencies and over 900 individual grant programs that award over $350 billion in grants each year. The grant community, including state, local and tribal governments, academia and research institutions, and not-for-profits, need only visit one website, Grants.gov, to access the annual grant funds available across the Federal government.

U.S. Small Business Administration
Individuals often call or visit the SBA asking for grants to start their business. In many cases, they have read or heard about this free money and how easy it is to get through late night talk shows, on the Internet, or in some obscure publication. In most cases, the information is incorrect and misleading. In other cases, it is close to a scam, at times asking for money for additional information.

The SBA does not offer grants to start or expand small businesses, although it does offer a wide variety of loan programs.
(See http://www.sba.gov/financing for more information)

The SBA provides some grants, but they are generally awarded to organizations to provide specific technical assistance to small business owners. These grants may be targeted to nonprofits or educational institutions. SBA has funded
grants and contracts to help small businesses develop and maintain a drug-free workplace. These awards went to nonprofit organizations and Small Business Development Centers (SBDC) who demonstrated the ability to assist in
this effort. For more information go to:
http://www.sba.gov/news/drugfree

Other grant programs, such as the Small Business Innovation and Research Grants (SBIR), are coordinated through SBA but are provided by other federal agencies including the Departments of Health, Education, or Agriculture. Information on the SBIR program can be obtained at www.sba.gov/SBIR.