Start Up Business Grants

Every day in America thousands of entrepreneurs take the plunge and start their own businesses. Unfortunately, an equal number of them fail and close every day. One of the biggest reasons is lack of adequate funding. According to the U.S. Small Business Administration (SBA), it takes the average small business almost two years to begin earning a profit, which means start-up funding must be enough to fund the business for at least that amount of time.

Business owners eager to find financing sometimes ask about getting some “free” government grant money after seeing a commercial on late-night TV. If that's you, let me burst your bubble right now: forget it. The federal government does not give small business grants for start-up costs. All they provide is a very limited amount of funding for existing businesses producing a very specific service or technology.

Looking to State Governments for Start Up Business Grants

State governments are a little better for grants, with most of them having some sort of business development program. Each one is different so you'll have to contact your state to find out the details. But be warned, state start up business grants are few in number and limited in scope. They also come with stringent requirements that few start-ups meet.

If you're still interested in grant money after what you've just read, it can be found through private organizations dedicated to stimulating local and regional business. These organizations can be corporations willing to help businesses that will in turn be beneficial to them. They can also be foundations, business groups, or trade organizations. One such example is Idea Cafe.

Idea Cafe is a company started in 1995 to provide information, education, and networking opportunities to new entrepreneurs. Idea Cafe currently gives out a limited number of grants to start-ups with a good idea and business plan. To apply one only need visit their website, become a member for free, and follow their directions.

For more complete information regarding private grant money, you might try the Foundation Center. They provide comprehensive reports as well as online resources for locating private grant money. There are varying fees associated with their services.

The SBIC Program

In the absence of enough grant money to get you going, you might consider what's known as the Small Business Investment Company (SBIC) program. This program has been around since the late 1950s and matches private venture capital with funds from the SBA. At last count there were more than 450 SBIC organizations around the country that provide seed and early-stage funding for start-ups. Keep in mind though, there is a catch.

This is not “free” grant money. Instead it is an equity investment by the SBIC and the SBA. Both investors have their own requirements for receiving funds, and both will need to be repaid through a future buyout of their interest in your company. But the advantage of going this route lies in the fact that the SBIC investor does what he does to make money. By investing in your business he now has incentive to make sure you succeed. He's more likely to make his resources available to you than a grant maker would.

If all else fails there's always a low-cost loan from the SBA. Government loans programs are plentiful if you're willing to take the time to research and apply. You'll need to develop a good business plan to submit with your application, so if you're unsure how to do this you might contact your local chamber of commerce.

Finding financing for your new start-up is a long and arduous process, that's for sure. But nothing worth having is easy. Right?