Grants For Starting a Business-Hidden Trove of Small Business Start Up Capital
Would-be entrepreneurs often ask us: Where can I get find grants to start a business? And, sadly, some of these individuals pay big money to attend business financing seminars that travel from city to city talking enticingly about “free” government money for your business. All you have to do is pay these folks up front and they will fill out some paperwork for you to apply for these “grants.”
Trouble is, the rare few that are available are so highly specialized in research fields that the odds of getting them are astronomical. In practical terms, it is a dead end. Forget about government grants to start a new business. It won’t happen.
The U.S. Small Business Administration (SBA) gets the same question daily at their small business Answer Desk. And their response is always the same: “The SBA does not offer grants to start small businesses.”
But here’s the good news, and one of the best-kept secrets in the cutthroat world of venture financing. It’s called the Small Business Investment Company (SBIC) program, and it has provided nearly $30 billion in financing (both loans and equity investments) to 90,000 small businesses since 1958.
This program is for real. And while it is still going strong, it maintains a low profile by design, so the folks who manage the funds that invest in small companies don’t get totally devoured by cash-hungry entrepreneurs.
SBICs - some 450 of them nationwide - represent a uniquely successful partnership between Uncle Sam and private investors. Each SBIC - while licensed and regulated by the SBA - is actually a privately owned and managed investment firm that provides venture capital and startup financing to small businesses.
Seed money for some of America’s most beloved businesses originally came from SBICs, including America Online, Apple Computer, Callaway Golf, Federal Express, Gymboree, Outback Steakhouse, Staples, Sports Authority and many more.
SBICs also are funding up-and-coming small firms like NetSpend, an Austin, TX-based business that offers debit card processing and marketing services. Two brothers, Roy and Bertrand Sosa who moved their family to Austin from Mexico in 1986, founded NetSpend.
They launched the business from their one-bedroom apartment in 1998 with $750. In 2000, several SBICs invested in the fledgling firm, helping fuel a period of rapid growth that landed the company as the National Association of SBICs’ Portfolio Company of the Year in 2003.
Catapult to the big time
SBICs have been a marvelous mechanism for catapulting promising small companies into the big time. The government itself does not make direct investments, nor does it select the firms that will be backed. That’s all left to the qualified private fund managers. The funds set their own policies and make their own investment decisions.
What the SBA does do is match funds. For every dollar the private funds put up, they are eligible to receive another two dollars from the SBA - a huge boost. Here, the SBA invests alongside private risk-taking investors. And while hardly anyone knows it, this program has made Uncle Sam the largest single investor in U.S. private equity funds.
Each SBIC is free to define its own area of interest. Some specialize in specific industries, geographic areas or personal interests of the fund managers. And while all SBICs will consider applications from socially and economically disadvantaged entrepreneurs, Specialized Small Business Investment Companies (SSBICs) make all of their investments in that area.
Visit to - http://free-smallbusinessgrants.blogspot.com/
Source - http://www.startupnation.com/business-articles/1164/1/AT_Small-Business-Capital.asp
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