Free Money? Not Quite

The following article is provided by SCORE, a nonprofit association of business counselors who mentor small business owners across the U.S. For more information, see the SCORE Web site:

Nothing good in life comes easy, and that includes getting financing for your small business.

Despite advertisements to the contrary, no federal government agency – including the Small Business Administration – offers grants to start or expand small businesses.  Most foundations, corporations, and private institutions that sponsor grant programs follow the same policy, except in cases where the business involves the development of a new technology, or is a nonprofit.

The SBA does administer several loan programs in partnership with local lenders, community development organizations, and micro-lending institutions (agencies that specialize in limited, short-term financing). SBA backs those loans with a guaranty against non-payment that eliminates some of the partners’ risk. In other words, your application for an SBA-backed loan is actually an application for a commercial loan (through your local bank) structured according to the SBA’s requirements.

SBA loan programs include the basic 7(a) program; “504” loans, which are delivered through Certified Development Companies (CDCs) for acquiring real estate, machinery, or equipment as part of an expansion or modernization; and post-disaster recovery and assistance loans. Complete details on these programs and their application requirements are available under the services section of

Depending on where you live, your small business may be eligible for assistance from state and local economic development agencies. Most often, the assistance takes the form of workspace, training, and administrative support for start-ups; reduced rates on existing office or production space; and tax incentives. Others sponsor micro-loan programs for specific business types such as childcare and firms that locate in or support designated enterprise zones.

Established small businesses can apply for federal grants to carry out various publicly mandated services or programs. As with the SBA loan program, they must be operated for profit, have a place of business in the United States, significantly contribute to the economy, and meet size standards for its industry. For example, wholesale trade industries are limited to 100 employees, while most retail and services industries can have average annual receipts of no more than $6.5 million. More information is available at, a central storehouse of information on more than 1,000 grant programs from 26 federal agencies.

Another source for researching potential grant opportunities is the Foundation Center’s Foundation Directory Online, at This subscription service offers access to a directory of more than to 80,000 grant makers.

For more assistance with creating a financing strategy for your new or growing small business, contact SCORE. SCORE is a nonprofit organization of more than 10,500 volunteer business counselors who provide free, confidential business counseling and training workshops to small business owners. Call 1-800/634-0245 for the SCORE chapter nearest you, or find a counselor online at

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