We've all seen the headlines: "Millions in free government money for your business." Late-night infomercials, reference guides and websites promote the availability of grant money to entrepreneurs for starting and expanding businesses. Does it sound too good to be true? Well, it is! Your small business resource, the U.S. Small Business Administration (SBA) (http://www.sba.gov/), has valuable information to help turn your entrepreneurial dream into a thriving new business.
Would-be entrepreneurs often ask the Small Business Administration “Where can I get find grants to start a business?” And, sadly, some of these individuals pay big money to attend business financing seminars that travel from city to city focusing on “free” government money for their business. All you have to do is pay these folks up front and they will fill out some paperwork for you to apply for these “grants.”
The trouble is the rare few grants that are available are so highly specialized in research fields that the odds of getting them are astronomical. In other words, it’s a dead end. Forget about government grants to start a new business. It won’t happen.
The truth is that federal and state governments do not provide grants for starting and expanding small businesses.
The Small Business Administration or banks will not give money to anyone unless they meet a certain criteria. They have several lending programs, which makes it easier for a small business to borrow money. SBA administers these three separate, but equally important loan programs: 1) The 7A Loan Guarantee Program, 2) The SBA Low-Document Program, and 3) SBS 504.
To apply for an SBA loan, you need to visit your local participating bank or lending institution. General lending criteria for the Small Business Administration include: 1) outstanding credit history (FICO/Credit Score of over 700), 2) cash flow adequate to service the debt, 3) collateral, 4) equity, 5) character, and 6) experience.
Banks do give out loans, but they typically aren’t a good source for new companies unless you have built a relationship with the banks.
The four main types of loans that banks offer are: 1) Installment loans, on which the business makes monthly payments over a certain number of years, 2) Term Loans, with which the entire loan is paid off after a predetermined term (usually one, two, or five years), 3) Asset-based loans, which might be for inventory or equipment, and 4) Revolving lines of credit, which businesses can draw upon when cash is low and then pay off when cash flow is high.
Remember that 90% of all start-up money for a business comes from private sources such as moonlighting jobs, working part time, divorce settlements, child support payments, yearly income tax returns, 401K’s and other private and government pensions. Over 25% of all companies are started with less than $5000.
Raising money for your company is hard work and it can be completed only with careful planning and research. And again, don’t wait around on grant money to start your business.
Successful steps to opening a business is listed at (www.angelspress.com/businesslevels.html) Top business mistakes are listed at (http://www.angelspress.com/10topbusinessmistakes.html).
Cathy Harris (http://www.cathyharrisspeaks.com/) is a motivational speaker and business consultant.
Copyright © 2007. Cathy Harris. All Rights Reserved
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