Raising Money for Your Business 5
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Where can I get more information about financial assistance from the SBA?
To find out more about these and other SBA financial assistance programs, call the nearest SBA office. You will find the number in the blue pages of your phone book under the federal government listings. You can also call the SBA answer desk at (800) 827-5722 and use the automated answering system to get a prerecorded message giving the phone number of your nearest SBA office or visit their web site at http://www.sba.gov.
Are there other government organizations that will help my business get a loan?
Depending on the nature of your business and its ownership, you may be able to get help from numerous other federal or state agencies. Among them: the Export-Import Bank, the Department of Housing and Urban Development, and the Department of Agriculture. Generally, none of the agencies will toss money your way just because you think you've got a hot idea for a new business. But they may have loan programs available that will help your business expand and grow or secure certain types of contracts.
You should also investigate state sources of funding. Look in the state government office listings in the phone book for phone numbers of departments with names like economic development or industrial development. Call and ask if your state has any funding programs available that would help your type of business. You may also be able to get this information from a local Small Business Development Center, a Service Corps of Retired Executives office, or an SBA office. Women and minority business offices (state, city, or federal) are still another source of information. You can find links to these resources on the SBA web site.
Finally, don't ignore management help available from regional, state, or federal government sources. The training sessions and one-on-one counseling often provided by government-sponsored organizations can provide needed consulting and other help at low or no cost.
Will the government give me a grant to start a business?
Chances are you’ve seen classified ads, booklets or books that claim you can get "Free Government Money for Your Business," or something similar. What you need to realize is that while there is grant money available from government and other sources, no one is going to give you a grant just because you want to start a business. In fact, rarely does anyone get a grant to start a new venture. Any grant money that is available is generally awarded to nonprofit organizations for the development of some service that benefits the public or is given to companies that have developed or have the facilities to develop a product or service needed by the government.
Where can I find out what government grants are available?
The Federal Register is one source of information about grants. It is published on weekdays by the federal government and contains a variety of announcements about grant programs, including announcements of grants. You can find the Federal Register at large public or college libraries or access it on the Internet at http://www.archives.gov/federal_register .
Another source of information about federal grants is the Catalog of Federal Domestic Assistance (CFDA), which is published yearly by the government. This publication is available in some large public libraries and college libraries and is also on the web. For information about the CFDA, see http://www.cfda.com .
Finally, your state or city might have grant money available either directly from their own coffers or, more likely, through federal grant programs that are administered locally. The federal government gives grant money to the state or local government; the local government is responsible for handing out that grant money to deserving local businesses that apply for it.
Your state may have one office designated as a clearing house for information about grants. In New York State, for instance, the Assembly Speaker's Office publishes a newsletter called the Grants Action Newsletter, which lists available state grants and includes brief summaries of some federal grants that are open. A state (or city) office of small businesses, department of economic development, or department of industrial development should be able to point you toward sources of grant information in your state or region.
Are there any other sources of government money for small business?
A program called the Small Business Innovation Research program offers small businesses funding to do research for various federal agencies. These research projects are announced quarterly in the SBIR Pre-Solicitation Announcement. In fiscal year 1996, federal agencies participating in the SBIR program made awards totaling $916 million.
How does the Innovation Research program work?
Congress created the Small Business Innovation Research (SBIR) program in 1982 to encourage small businesses to do technological research for the government and to encourage the commercialization of research done for the government.
Federal agencies that participate in the SBIR program select certain research topics for funding and then publish a list of those topics in the SBJR Pre-Solicitation Announcement which is published quarterly. Businesses interested in doing research on any of the announced topics contact the appropriate agency for the complete solicitation, which gives more specific information about the type of research desired. If the business still wants to apply for funding after reading the solicitation, they submit a formal proposal showing how their company would handle the research project.
How do the agencies choose which proposal will receive the award?
Your proposal will be considered along with any others received. If several companies submit suitable proposals for the same project, the best will be selected for the award. If none of the proposals for a particular project are acceptable no award is made. Among the criteria the Department of Defense uses to judge proposals are these:
- scientific and technical quality of the proposal
- relevance to the topic description (with emphasis on the innovation and originality of the proposal)
- qualifications of the principal investigator and other key personnel
- adequacy of equipment or facilities
- anticipated benefits of the research
Among the reasons proposals get rejected are:
- they don't conform to the instructions listed in the Proposal Preparation Instructions and Requirements section (which is included in each SBIR solicitation)
- they don't match the needs specified in the solicitation
- the company doesn't appear to have the stability or experience to complete the project
How much money would I get if I receive an SBIR award?
There are two levels of awards, Phase I and Phase II. Phase I awards are made in amounts of up to $100,000, with work on the project being started and completed within a six-month period. Phase II awards are for up to $750,000 for as many as 2 years. You cannot apply for a Phase II award unless you received Phase I funding for the same project. For more information see: http://www.sba.gov/sbir/indexsbir-sttr.html
How can I get the SBIR Pre-Solicitation Announcement?
Contact the SBA Office of Innovation, Research, and Technology and ask to be put on the mailing list for the SBA/SBIR Pre-Solidtation Announcement. The address is:
U.S. Small Business Administration
Office of Technology - Mail Code 6470
409 3rd Street SW
Washington, DC 20416
205-6450
Fax: (202) 205-7754
http://www.sba.gov/sbir/
Once I get a business going and see I need more cash, how can I get it?
The traditional ways include getting bank loans, inventory or receivables financing, a contract loan (if available), funding from family or friends, or a second or even a third mortgage on your house. You could also take a partner or limited partner (a general partner usually works in the business with you while a limited partner usually just puts up money) or incorporate and seek investors who will give you money in exchange for equity (ownership) in your company.
What is venture capital?
Venture capital is money invested in a business in return for partial ownership. Generally, venture capital is used to fund high-risk businesses that show the potential for high profit (for example, $50 million in sales within 5 to 8 years). Venture capital firms make their profits by selling shares of stock of the successful ventures to the general public.
What do venture capitalists look for?
In addition to a product or service that has the potential for rapid growth, venture capitalists want to see a management team that has the ability to take the business concept and make it work. If you want to start a business in an industry you know nothing about, if you have no experience running businesses, or if you want to run the business on your own, don't waste postage sending business plans to venture capitalists.
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