The federal government provides grants directly to individual business owners to start or expand small businesses. The idea does seem to be a common myth.
The www.business.gov, a site run by the U.S. Small Business Administration (SBA) is the following warning:
“We’ve all seen the headlines: Millions of free government money for your business.” Late-night infomercials, reference guides and websites promote the availability of grant money to entrepreneurs to start and expand businesses. Sounds too good to be true it is.
The site goes on to say that “federal and state governments do not provide grants to start and expand small businesses.” However, the federal government offers low-interest loans and venture capital to fund programs to help business owners start and grow their businesses.
Subsidies may be available in certain limited situations. Business.gov The site says: “Federal and state subsidies are only available to support nonprofit organizations, lending institutions, and state and local programs of government that provide technical and financial assistance to small businesses.” If any of that applies to you, you can find more information on grants.gov, another site of government.
Business.gov the site also says: “Once again, the federal and state government agencies do not award grants to start up, management and expansion of small companies. Nevertheless, state and local government scholarship opportunities may exist for small business dedicated to niche activities. Many states provide job training grants to new and expanding businesses. Other states receive grants to support scientific research projects, and subsidies for agricultural development. You should check with your state and / or local government for more information on these special grants.
In the FAQ page from another site of the SBA, www.sba.gov no similar information. The question arises: “How can I get a small business grant?” and the answer is “At this point, Congress has set aside money for grants to start and / or expand a small business. The U.S. Government does have grants that meet other purposes unrelated to business needs.
The SBA, however, offer a loan guarantee program. The program guarantees loans made by local lenders that lenders would not otherwise approve. This makes it possible for more small business owners to obtain loans to start or grow their businesses.
The most common type of loan program called the 7 (a) of the loan. To get a 7 (a) of the loan, a small employer must demonstrate that it will be able to repay the loan in cash flow of your business. The SBA will also consider good character, management capability, collateral and owner’s equity contribution.
To request a loan 7 (a), you go directly to a bank that participates in the SBA guarantee. Most, but not all banks in the U.S. isn’t participating. There are also some non-bank lenders who participate also.
After requesting the loan, the bank will decide whether a regular loan, or if there are any deficiencies in its application, whether to request an SBA guaranty. For more information about the guarantee program, contact the SBA.
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