SCORE:Free Government Money Is a Myth

Dear SCORE:

My friend attended a seminar where the speaker claimed the U.S. government is giving cash grants to help citizens buy a house or start a business.

“It’s easy to get your share of all this free money and you’re a fool if you don’t help yourself like the fat cats do,” attendees are told.

The seminar company charges only $1,300 to get started and they provide grant applications and addresses of government agencies that give away free money. I need cash to start my own business. Can you help me apply?

Signed,

Waiting to Get Started

in La Crescenta

Dear Waiting:

First, there is NO Santa Claus. Free government money is a myth, perpetuated by those that offer these seminars, infomercials and books. Have you ever actually met someone who “got the free money?” The claims are hard to pin down. Most Americans don’t want the government taking their tax money and giving it away, and it doesn’t. U.S. government grants are available to local governments and nonprofit organizations to train unskilled workers, fund research or administer public programs.

All “grants assistance” organizations that we have investigated make a lot of money selling a scheme to help you apply for government grants that never really pan out. We know of one radio advertiser that signs up grant seekers for a year of service, and then at the end of the year will claim more time is needed as grant money will becoming available next month. They offer clients a 15% discount to extend service for an additional year. And guess what... many who don’t have that extra money will sign up again with high hopes, only to continue the waste and frustration.

There are better and more sure ways to obtain the financing you need to start a business. SCORE research shows that most successful small businesses start with a fresh idea, detailed planning, bulldog determination and funds that come from private sources. As Jim Weidman, spokesman for the National Federation of Small Business, points out: “Most small businesses are started with a very small amount of money, around $5,000. People come up with it out of their personal savings, or by borrowing from friends or family. They value the funds because it is their own and they have more long-term success.”

Examples of those that started successful businesses without government help include Larry Ellison who, with $2,000 of his own savings started Oracle, the software company. Mary Kay Ash was working for others when she started Mary Kay Cosmetics. Carl Karcher started with a rented hot dog cart and developed his business into Carl’s Jr. restaurants.

So, what does the Small Business Administration (SBA) do? The most frequent use of SBA guaranteed financing is for purchasing inventory, obtaining new equipment or a new business facility. Some banks, along with a SBA guarantee, will lend money to experienced business people who have a portion of the start-up money and a strong business plan. Persuading a bank to take all the risks to help you start your business is very difficult, if not impossible.

Sometimes, budding entrepreneurs will try to borrow from life insurance or retirement plans to start their business. But, before committing to that, you should look at your age and family situation to know if that is a good option.

I wish I could tell you there is free money for anyone with a great idea, but I can’t. I can help you develop your business idea into a strong business plan that can help you get started. Then, when you get the necessary experience and business success, there may be more options available for you to get resources to expand.

If you would like to talk about your business dream, contact SCORE. More thatn 90 volunteer business counselors in Los Angeles County donate their time to provide free confidential business assistance to entrepreneurs. SCORE is a nonprofit organization, which has served more than five million small business owners throughout the nation. Contact SCORE through your local Chambers of Commerce or SCORE’s website at www.scorela.org.

Dick Mader, a La Cañada Flintridge resident, co-founded Mader News, Inc., in Glendale in 1972. He writes about business issues and helps small businesses as a SCORE counselor.