According to an article in Wall Street Journal’s Startup Journal, about half of all small businesses finance their formation or expansion with credit cards, according to a survey by the National Small Business Association and Arthur Andersen. The same survey showed that only 6% were financed with an SBA loan, and just 2% received venture capital funding.
There are very few grants available for starting or expanding a business unless the business involves research and development or high technology. Many grants have caveats, such as:
They are available only for a specific group of people. Mainly: Research and development for high technology, biotechnology, military products and energy related products, and grants for people who will locate their business in a poor area and employ the people who live there.
You must compete with hundreds of other companies.
The money must be used for a very specific purpose. (You may not be able to pay your rent or mortgage with that money.)
Many government grants can be applied for only when they are announced in the Federal Register, or only during a small window of time once a year.
It often takes a lot of work to apply for a grant.
You often have to provide a personal guarantee (putting your house on the line) and/or take on responsibility for raising 10-30% of the finances from your own sources (e.g. savings, loans from relatives).
You often have to report on your use of the money, or follow particular rules.
You can explore the SBA’s list of Federal Grant Resources, but you’ll soon realize that most grants are not available for the typical business.
Here’s what the Small Business Administration says about the pervasive idea that they give out grants to businesses:
"SBA does not offer grants to start or expand small businesses. SBA’s grant programs generally support non-profit organizations, intermediary lending institutions, and state and local governments in an effort to expand and enhance small business technical and financial assistance." – Source: SBA.
For more information, visit: http://www.lib.msu.edu/harris2 3/grants/2biz.htm
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