This is a question that is asked daily in our office and every other SBDC office in Iowa, and unfortunately the answer is almost always no. If there is a grant
Myth #1 – There is an excess of federal money reserved for small businesses to help boost our nation’s economic status – Can you really imagine that folks in Washington, D.C., know what would be good for Shenandoah, Iowa’s economy or even for Council Bluffs? There is really no way they would be able to predict the economic impact a new coffee shop in Shenandoah would have or the impact a new technology business in Council Bluffs would have. It just isn’t feasible to have someone sitting at a desk in Washington decide the fate of a small rural town’s future by doling out thousands of dollars to random business plan applications.
The Truth – There are federal programs with money to enhance economic development in communities. A large amount of this money is dedicated to the economic development of rural areas. Economic Development in rural Iowa equals the development of entrepreneurial activities… hence the commonly coined term “grow your own” in rural states and in rural counties.
So if the Federal Government agencies are not qualified to decide who to give the money to, who is? The answer is non-profit organizations (501c3s) with an economic mission to a certain AREA. This translates into cities, economic development groups or regional development groups. These groups submit applications to federal agencies defining a program that will help them develop there community. MOST of the time these local agencies will develop revolving loan funds with low interest rates. These are great programs that allow businesses to get financing and much lower rates and sometimes lower restrictions than traditional loans. Most of the time these loans only cover 50% of the start-up cost and have requirements attached to them that match the organization’s mission. Requirements may include job creation, equity investment, industry specific businesses, etc.
Sometimes local organizations may create GRANT programs that match their mission. For example a downtown organization may offer grants up to $10,000 with a 50% owner match for projects that beautify the outside of their business.
The key is to look at your state and local programs. Visit your state’s website (find Iowa’s at www.iowalifechanging.com) and talk to your local chamber, city and economic development center to find out what programs may be available to you.
Myth #2 – There is FREE money out there somewhere. I can get this money with no obligations whatsoever.
Many people believe that they can start a business without having any personal monies to contribute. That because of their situation (minority, women, disabled), they can apply for 100% of what they need for their business and get it with no obligations to pay it back.
The Truth – There is no FREE money. No free rides. Any reward is going to be connected to some kind of accountability. If you are lucky enough to secure a grant through a local program or foundation, you will most likely be required to use the money as leverage for more money (a loan) or you will be held to a contract agreement that may include requirements like job creation, match money, etc.
MYTH # 3 – If I buy a book or hire a grant search company, they will uncover the grants for me, guaranteed!
There are literally hundreds of companies whose business model is to find grants for individuals to open businesses. There are also books, cds, and fee based websites. Fees can start at $50 and go upwards to $5,000 to $10,000. Many of these companies offer guarantees for success.
The Truth – If you are looking for someone to take the process of searching out of your hands be cautious of promises and “too good to be true” offers. If a promise is made that you are guaranteed a grant, proceed with caution. Federal, state and private grants are public information. You can find most federal grants on websites like www.grant.gov. Private foundation grants are listed on websites like www.foundations.org. If you do decide to work with a company, do yourself a favor and check them out at the Better Business Bureau’s website
Conclusion – The bottom line is that although there many grant websites with many, many listings, grants that go directly to small businesses are quite rare. If you find one it will most likely be from a local organization, foundation, or specific industry organization. When you find something start by calling the administrator and get the specifics on the application process and qualifications to make sure that you are eligible. No need to waste time on an application that you are not eligible for and it also doesn’t hurt to put a bug in the administrator’s ear about your forthcoming application.
Please feel free to add questions, comments, and opinions to this entry. And if you know of any grants for small businesses please SHARE! You can contact the Iowa Western Community College Entrepreneurial Center and SBDC by calling 712-256-6552 or visiting our website at www.iwccecenter.com