Wednesday, April 30, 2008

What if you're looking for free money for business?

**Updated July, 2012**
Know this...there's no such thing as a free lunch. When governments on any level think about doling out money to businesses, it's never out of the goodness of their hearts. There is something they crave, usually good-paying jobs for their constituents that they can claim to have created or preserved when they run for re-election. That explains a lot about "free money" for business.

If you understand that impulse, the shape that financial aid takes begins to make sense. If you as a business person own, or have the cash to start a big factory with good-paying jobs, cities, counties and states will turn themselves inside out for you with tax breaks, cash, and infrastructure improvements.
But if you want to start a one person or mom-and-pop shop? Not so much. The level of help can vary from one locality or state to another, and heavily depends on how much money that state or city has to provide. Much more likely are:
  • Loans and loan guarantees. Many states and local governments work with banks to arrange loans that may be below market rates OR provide guarantees for the repayment of loans that banks might otherwise be reluctant to make (say, of you have a spotty credit record or little collateral).
  • Tax breaks. Some local governments will give tax breaks, or freeze tax rates for a set period of time if you start a business there.
  • Counseling. Many nonprofits or small business development centers, often affiliated with governments, universities, or nonprofits, will provide information on writing business plans, finding financing, or other aspects of business planning.
  • Or maybe, straight-up grants. This most likely happens if a business is bringing lots of jobs, but also if a business is struck by a natural disaster, or if you are bringing a cutting-edge technology to market.
How do you find out about these opportunities? Again, YOU DON'T HAVE TO PAY ANYBODY TO FIND THIS HELP. Try the following sources:

  • Many states have economic development offices or agencies. To find one in your state, or a state you are thinking of moving to, see this website by the Small Business Administration  This site will give you the links to state offices that provide financial incentives to business, and lay out all their programs.
  • Federal programs by the Small Business Administration are laid out at their website. These are mostly loans and loan guarantees.Community Action Agencies were created in the 60s to aid the poor, but over a third offer help to small businesses in the form of loans and IDAs (individual development accounts), a program where the organization matches the savings of a client towards some financial goal. Check the Community Action Partnership website to see if a CAA near you works to help small businesses.
  • The U.S. Department of Agriculture also has an interest in rural economic development, and they have some programs aimed at those areas. See their website for details.
  • Port authorities are quasi-governmental bodies in port cities that often create financial incentive programs within their areas. Find one near you in the online membership directory of the American Association of Port Authorities.
  • Finally, check your own city or county government and see if they have an economic development office, and if they offer help or incentives. You can start with your phone book's blue pages, or check this online listing of local governments.
  • The office of Small Business Development Centers does local outreach and provides information about opportunities for small businesses throughout the country. They give information on financial help, business plan writing, and counseling. They have a website that shows local offices.
Remember that there is no guarantee of funding availability. At the federal level, Congress must appropriate the money, and if state and local governments and nonprofits can't get their grants, they can't provide any programs. Programs can be here today (if the agency got the grant or appropriation) or gone tomorrow (the money ran out or the grant didn't get renewed). But a free search through the websites listed above can keep you from paying for an overpriced "free money" seminar.

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