Art Mccarty's Site

The late-night TV infomercial is so alluring: "Come to our seminar and come across out how you may get your authorities grant to commence a smaller organization!" a breathless announcer intones. "Just $300." A smiling entrepreneur assures in a taped testimonial: "I got $40,000 for my modest company!"

The bright, red words: "Free Money!" fill the screen. It's an old story, and a single that makes small-business consultants, counselors, and advice columnists (this a single included) cringe. Whenever such ads run, we brace ourselves for calls and e-mail from entrepreneurs and would-be business owners who can't wait to get their hands on that no cost government dollars - which doesn't exist. Why are men and women who supposedly desire to be hard-headed, no-nonsense organization sorts so gullible? This is really a subject the Smart Answers column has addressed before, but I periodically revisit it. That's because these aren't harmless hoaxes. Seminar sellers and guide hucksters routinely con men and women into shelling out hundreds of dollars to hear lectures or buy directories that contain information readily available (yes, seriously free of charge!) in any public library or on the web.

"I've been working in small-business advancement for 16 years, and this urban legend by no means goes away," sighs John Rooney, a professor with the Lloyd Greif Center for Entrepreneurial Studies with the University of Southern California. "Interest and calls peak when some new guide or ad kicks in."

"BRIGHTEST TECH MINDS." Frequent sense along with the most basic awareness of company principles need to tell entrepreneurs that no a single besides Mom and Dad (perhaps) will give you no-strings money to begin a for-profit enterprise. "If the government was within the position of providing all of the funds totally free to men and women who begin their own enterprises, we wouldn't last long," says Mike Stamler, a spokesman for the U.S. Smaller Company Administration in Washington, D.C. "Not to mention that the American people today would in no way stand for the government setting individuals up in enterprise 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 can find a few extremely specific grants for little companies. A look in the details shows the income is hardly no cost. It comes with a host of restrictions and quid pro quos. For instance, some local agencies give tiny grants to businesses that locate in poor areas and guarantee jobs to individuals in an underemployed community, says Phil Borden, director with the Women's Enterprise Advancement Corp., a Extended Beach (Calif.) nonprofit company assistance center.

There are also some very restrictive, difficult-to-obtain grants given to small companies to investigation new technologies for the government. "There is something known as the Smaller Business enterprise Innovative Study (SBIR) program that gives entrepreneurs up to $100,000 to exploration an thought that's considered promising and as much as $1 million to create products from it, if the analysis pans out," Borden explains. "The issue is, the promising ideas need to do with things like how to 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 in the country. The notion that this kind of funds is obtainable to folks off the street is really a joke."

Prepared VICTIMS. Still, the free-money hucksters uncover ready victims due to the fact men and women need to believe there's a way around the challenging work of raising capital. "So several men and women say they heard it from a friend or saw it on TV. Of course, they've by no means really met anyone who got any free income. It becomes like the Holy Grail of little company, and a great deal of entrepreneurs get caught up in this thought that it is 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 administration didn't wish to let everyone know about them," Stamler recalls. "He told men and women to not take 'no' for an answer when they named us."

Rooney says he once ordered a "free-money" guide advertised on television.The author claimed every single entrepreneur was entitled to a federal government grant. Rooney received a directory of farmer's subsidies, Housing & Urban Advancement 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 income for their small business enterprise - they don't say how. Most of those featured entrepreneurs 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 tiny enterprise, you can find numerous sources of loans or equity financing for startups. "Money's not that tough to get from friends and family if you've got a really 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 Business points out: "Most new companies are started with a really tiny amount of cash, around $5,000. So men and women 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 loads of initial funding for inventory, working capital, or buying or leasing a building."