Discounting the free money for business myth

Aren't there grants available to start a business? The answer is … maybe, but don't count on it. TV salesmen hawk books about free money sources. They promise there is a grant out there for almost anything. While many individuals and businesses set up foundations and offer grants for specific purposes, there are limitations. To begin with, most grants are for nonprofit organizations. There are some grants for individuals but they are primarily for educational purposes or for special studies and research. Few grants to individuals are for the start-up of a for-profit enterprise. In fact, some tax laws prohibit a foundation from granting money to for-profit ventures.

If an individual does locate a grant to assist a particular business, it is usually for a very specific purpose and cannot be allocated to general operating expenses. For example, a business working with special needs children may find a grant to assist with the purchase of specialized equipment for use with these children. There are also greater opportunities for funding in the computer technology industry and for new innovations that have the potential for commercial use.

The key to receiving a grant is writing a successful proposal. This is very similar to a business plan. The written proposal outlines how the business will use the funds, why the funds are needed, and when the project will be completed. Most grant periods are for a limited time-frame and a proposal must often include information about the financial stability of the business to ensure that the particular grant is not the organization's only source of revenue.

The grantor is looking for the most suitable match for the available funds -- the business or individual who will put the money to the best use and can show sustainability. Each grant may have its own proposal process, some which can be very lengthy and detailed. If a grant is awarded, the recipient will be required to report on the use of funds and provide proof that the particular project funded was completed. It is not unheard of for a grantor to ask for inappropriately used funds to be returned. Keep in mind that writing a proposal is not a guarantee of funds. One grant may have hundreds of applicants and competition is intense.

To search for a grant from a foundation the following Web sites provide an overview of foundations offering funding: www.foundations.org and www.fdncenter.org. For federal funding check www.firstgov.gov/. Anyone who does not have a computer to search the Internet can go to the local library.

If starting a business is the goal, a grant can be a resource but should not be used as the sole means to fund the business. Why? There is no guarantee that a grant will be awarded and, if awarded, the grant will probably only fund a very specific portion of the business. Contrary to what is said on late night television, there is no secret to finding money, 'free' or otherwise, just hard work.