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Dispelling the Myth about Government Grants for Small Businesses

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More and more frequently, the general public is being bombarded with advertisements for “free government grants” giving the impression they are up for grabs and anyone can get one. Unfortunately, that is not the case.  Most of these messages are false promotions used by scammers to make a quick buck. Many people believe that government grants will be the perfect solution on how to finance a college education, buy a new home or start up a new business.

The truth is that the US government does provide grants to “…nonprofits, educational institutions, (and) associations … but rarely are these available to small businesses, and they are never available to cover startup costs, debt and operating expenses.”

Furthermore, “Federal and state government agencies do not provide grants for starting a business, paying off debt or to cover operating expenses. Government agencies do not provide ‘special’ grants for women, minorities, veterans or disabled entrepreneurs.”

The Department of Health and Human Services (HHS) — the managing partner for the Grants.gov Program provides one of the best sources for information about government grants online at www.grants.gov.

The U.S. Small Business Administration (SBA) provides facts about government grants and emphasizes that SBA does NOT provide grants for starting and expanding a business — SBA only has authority to make grants to non-profit and educational organizations in many of its counseling and training programs.

Grants from the Federal government are authorized and appropriated through bills passed by Congress and signed by the President. Because government grants are funded by tax dollars they require very stringent compliance and reporting measures to ensure the money is well spent.  They are not given away indiscriminately and grant authority varies widely among agencies.

Some business grants are available through state and local programs, nonprofit organizations and other groups. For instance, some states provide grants for expanding child care centers or creating energy efficient technology, or developing marketing campaigns for tourism. The amount of grant money available varies with each business and each grantor.

These grants are not necessarily free money; they usually require the recipient to match funds or combine the grant with other forms of financing such as a loan. If you’re planning to start a business or expand an existing business and need financing help, both federal and state government agencies provide financial assistance programs that help small business owners obtain loans and venture capital financing from commercial lenders if you are not one of these specialized businesses.

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