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Will Uncle Sam Give Me Money to Start My Business?

Maybe…But Don’t Put All Your Hopes in That Basket!

By Gail Harlow

Q: I'm looking for government grants available to women who want to start their own business. Do you have any advice for me?

 A: Most states have programs designed to help women and minorities find the resources—financial and otherwise—that they need to start their own businesses. You might start by checking with your State Departments of Labor or Commerce to see what your options are locally.

But the ultimate source—the ‘godmother’ of Government grant information—is the Catalog of Federal Domestic Assistance (www.CFDA.gov). Try this direct link (http://www.cfda.gov/public/grantsubtopic.asp?catcode=B) to the appropriate page on the CFDA’s site for a complete list of available Government grants, plus eligibility requirements and detailed information about how to apply. If you have your heart set on applying for a grant, however, be prepared for a long approval process and lots of paperwork.

 Applying for a loan from a Small Business Administration-approved lending source may be a better way to capitalize your dream business. The Small Business Administration (SBA) doesn’t offer grants, but it does make it possible for small business owners to qualify for loans for which they might not otherwise be eligible. 

Basically, if you meet the SBA’s criteria of a sound business risk, it will guarantee a substantial portion of your loan (as much as 85 percent of loans up to $150,000 and 75 percent of loans of more than $150,000, up to a maximum of $1 million) to fund your business.  That can be a boon to those who don’t have the necessary collateral to obtain commercial loans. Go to  www.sba.gov/financing to find information on lender programs backed by the SBA.

Other Web “mentors”: The Commerce Department’s Minority Business Development Agency offers good advice and conventional wisdom on alternative financing sources at its site, www.mbda.gov; and The Service Corps of Retired Executives (www.score.org) is a well-run (I wonder why!) organization whose mission is to lend advice and support to wannabe moguls. You’ll find useful articles, success stories and other resources on the SCORE site, plus you can sign up for free, one-on-one finance, management and marketing advice from a SCORE e-mail counselor who knows the score when it comes to the business you want to start.

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If your business is already up and running, one method those mentors may suggest to you as a way of handling your cash-flow problem is  “factoring” your receivables. Factors are companies that buy your accounts receivable from you. In essence, they’re betting on your customers’ ability to pay. You get cash up front, they collect the receivables, charging you a fee of between 3 and 6 percent a month, until all the debts are collected and they get back the money they advanced to you. Whatever is left over you keep.

Who else can “ show you the money”? You probably know people who have taken out a second mortgage on their homes and/or hit up their relatives to get the seed money they need to plant their “field of dreams” and keep it watered until those crucial  first, second and third crops come in. There’s a reason for that—it isn’t easy convincing commercial banks or Government bureaucrats to put up “their” money where your mouth is, so to speak.

If you’ve done your homework, have an accurate picture of your risks, as well as the upside (competitive advantage) of your particular business (no hype—this is the time to be honest with yourself!), then that’s not a bad way to go, either. That’s assuming, or course, that you’re fortunate enough to have those resources to call upon.

If your family comes through for you on this scale, you’ll never be able to take them for granted—or miss a holiday meal with them, again!

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Gail Harlow is the Founding Editor of MAKING BREAD magazine.

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