Federal Information for Grants in Starting a Business for Minorities

Promises of free federal grant money for minority business start-ups are mostly misleading.

Unfortunately, the federal government does not provide information on minority grants for starting a business simply because the federal government does not award grants for business start-ups. If your minority business is engaged in scientific research and development, the government does award grants under the Small Business Innovation Research and the Small Business Technology Transfer programs. According to the Small Business Administration however, the government has no authority to award grants for starting a business.

Grants vs. Other Federal Start-up Financing Assistance Programs

The good news is that the federal government offers a variety of low-interest loans and other assistance programs to help minority business start-ups. Federal loan programs are not federal grants, however. The government awards grants, such as SBIR and STTR grants, through a competitive process to accomplish a specific public purpose. They do not require repayment, but always come with stringent compliance and reporting procedures.

In contrast, recipients must repay debt from federal loans. This distinction explains why the federal government cannot gift taxpayers' money to private individuals to fund business start-ups.

Beware of the Hype

Because the federal government does not have authority to award grants for business start-ups, it follows that pitches to sell "insider" information on government grants to start a business are, at best, deceptive.

The federal government itself is the only reliable source for federal grant information. You can find detailed information on all federal grants at no charge for the 26 federal agencies that award over 1,000 annually at grants.gov.

You can also obtain a wealth of information on federal government small business loan and other assistance programs at the Small Business Administration website, sba.gov.

Realistic Solutions to Start-up Funding

Finding capital is always a major challenge for aspiring minority entrepreneurs. Urban legend may have the federal government as the obvious go-to source for funding business start-ups. The reality, however, is altogether different. Most entrepreneurs fund their business start-ups from sources other than the federal government. According to SmallBusinessNotes, the leading sources for start-up capital are 72 percent Personal Savings, 45 percent Banks, 28 percent Friends & Relatives, 10 percent Individual Investors, 7 percent Government-guaranteed Loans, 1 percent Venture Capital Firms. Note the absence of federal grants as a funding source.

Minority Business Plan Contests

Minority Business Plan Contests offer aspiring entrepreneurs on the hunt for free money valid opportunities to compete for start-up business grant funding. Local communities, corporations and numerous colleges and universities sponsor these contests. Contestants present their business plans to a panel of judges who determine the winners. Winners frequently receive substantial sums of cash. Even losers receive invaluable advice on running a business. Examples of the more prominent annual minority business plan contests are the Morehouse College Entrepreneurship contests and the Enterprise Center contests.

References

• Grants.gov: Who is Eligible for a Grant?
• Grants.gov: What is a Grant?
• SmallBusinessNotes: Startup Financing
• Federal Trade Commission; Free Government Grants': Don't Take Them For Grant-ed; September 2006
• SBA.Gov: Minority Owned Businesses
• SBA.gov: SBA Warns Small Businesses of Fraudulent Attempts

Resources

• Morehouse College Entrepreneurship Center: Business Plan Competition
• Minority Business Plan Competition