My Blurb Regarding Free Money The late-night TV infomercial is so alluring: "Come to our seminar and discover out how you'll be able to get your authorities grant to begin a modest company!" a breathless announcer intones. "Just $300." A smiling entrepreneur assures in a taped testimonial: "I got $40,000 for my tiny enterprise!"
The bright, red words: "
Free Money!" fill the screen. It is an old story, and a single that makes small-business consultants, counselors, and advice columnists (this one included) cringe. Whenever such ads run, we brace ourselves for calls and e-mail from business owners and would-be entrepreneurs who can't wait to get their hands on that cost-free govt money - which doesn't exist. Why are men and women who supposedly want to be hard-headed, no-nonsense organization varieties so gullible? This can be a subject the Smart Answers column has addressed before, but I periodically revisit it. That is mainly because these aren't harmless hoaxes. Seminar sellers and ebook hucksters routinely con people today into shelling out hundreds of dollars to hear lectures or purchase directories that contain info readily available (yes, genuinely totally free!) in any public library or on the web.
"I've been working in small-business advancement for 16 years, and this urban legend never ever goes away," sighs John Rooney, a professor on the Lloyd Greif Center for Entrepreneurial Studies on the University of Southern California. "Interest and calls peak when some new ebook or ad kicks in."
"BRIGHTEST TECH MINDS." Typical sense and also the most basic awareness of organization principles need to tell business owners that no a single besides Mom and Dad (maybe) will give you no-strings funds to begin a for-profit business. "If the govt was within the position of providing all of the funds totally free to men and women who start their own corporations, we wouldn't last extended," says Mike Stamler, a spokesman for the U.S. Modest Company Administration in Washington, D.C. "Not to mention that the American individuals would hardly ever stand for the government setting individuals up in organization at no cost, and all at taxpayer risk."
Yet, the myth persists. Like most con artists, the free-money hucksters take a grain of truth and distort it. You'll find a few highly particular grants for small organizations. A look in the details shows the dollars is hardly free. It comes with a host of restrictions and quid pro quos. For instance, some local agencies give little grants to enterprises that locate in poor areas and guarantee jobs to people in an underemployed community, says Phil Borden, director of the Women's Enterprise Development Corp., a Lengthy Beach (Calif.) nonprofit organization assistance center.
You will discover also some very restrictive, difficult-to-obtain grants given to small companies to investigation new technologies for the govt. "There is something known as the Smaller Business Innovative Analysis (SBIR) program that gives business owners up to $100,000 to exploration an notion that is considered promising and as much as $1 million to create products from it, if the exploration pans out," Borden explains. "The dilemma is, the promising ideas need to do with things like how you can capture a satellite in orbit and repair it. The individuals who compete with intricate, detailed proposals for these grants are experts in engineering and science and have the brightest technology minds within the country. The notion that this type of money is readily available to folks off the street is usually a joke."
Prepared VICTIMS. Still, the free-money hucksters discover prepared victims simply because individuals would like to believe there's a way around the challenging work of raising capital. "So several people today say they heard it from a friend or saw it on TV. Of course, they've never ever actually met anyone who got any no cost income. It becomes like the Holy Grail of modest organization, and lots of entrepreneurs get caught up in this thought that it's out there," Rooney says.
The true believers are amazingly persistent. "About six or eight years ago, there was a scam like this that produced a run of calls," says the SBA's Stamler. "The huckster in the heart of it implied that these grants were there, but the government didn't need to let everybody know about them," Stamler recalls. "He told individuals to not take 'no' for an answer when they named us."
Rooney says he once ordered a "free-money" ebook advertised on television.The author claimed every entrepreneur was entitled to a government grant. Rooney received a directory of farmer's subsidies, Housing & Urban Improvement programs, and government-loan applications.
What about those testimonials from happy entrepreneurs? Listen closely, Stamler says. They usually say they "got" so much federal government funds for their tiny organization - they don't say how. Most of those featured business owners have gotten small-business loans, he says. The SBA guaranteed more than $16 billion in loans during fiscal 1999 through its three major financing programs.
LEGITIMATE SOURCES. The irony is that in this boom time for smaller enterprise, you can find numerous sources of loans or equity financing for startups. "Money's not that hard to get from friends and family if you've got a genuinely good concept," says Rooney. "I've seen college students raise millions with their dot.com ideas. Why waste your time with the snake-oil salesmen when you could be talking to professionals who know what they're doing?" After all, it is not as though the average startup needs several millions to get off the ground.
As Jim Weidman, spokesman for the National Federation of Independent Company points out: "Most new enterprises are started with a quite modest amount of cash, around $5,000. So individuals come up with it out of their personal savings or borrowing from their relatives, unless they are buying an ongoing enterprise or starting a company that needs lots of initial funding for inventory, working capital, or buying or leasing a building."