Time Magazine named TruTouch one of 2006’s best inventions. The device, which tests a drivers’ alcohol levels with much faster technology than breathalyzers, won a government grant that allowed the company to move into further development.
From the initial investment, TruTouch’s developers were catapulted into a second round of funding in the form of a $438,000 grant administered by the United States Army Medical Research and Materiel Command.
The story of TruTouch is two-fold: First, yes, there actually is the potential to find “free money” when you’re starting a small business. And second . . .
It’s really, really tough to get.
Federal grant money is administered by individual agencies and each has a very specific set of requirements. For example, The U.S. Department of Agriculture awards a grant of up to $75,000 to “expand, or assist in the improvement and expansion of, domestic farmers markets, roadside stands, and community-supported agriculture programs.”
When researching Federal grants,the best place to go is the United States government’s Small Business Innovation Research (SBIR) and its Small Business Technology Transfer (STTR) programs. SBIR/STTR offers grants to companies that undertake scientific R&D projects that have a high likelihood of having commercial applications.
But not every business is in the R&D market. Here then are some other ideas for the rest of us when looking for sources of startup funding for small businesses:
State and local governments: State and local governments want to attract new business to their areas and many of them have created a variety of incentive, economic, and loan programs and funds intended to do just that.
For example, Portland, Ore., wanted to attract more startups, so prospective investors worked with the Portland Development Commission to create the Portland Seed Fund. Begun with a $500,000 infusion from the general fund, the new entity was dubbed Bridge City Ventures. Bridge City Ventures then approached other stakeholders in the city and eventually created a seed startup fund worth over $2 million.
Another great program of this kind is in New York City where NYC Department of Small Business Services is accepting applications for grants up to $90,000 to help offset rising real estate costs for small businesses. The program has an overall $1.8 million in grant funding.
It’s well worth researching to see if there are similar programs in your area.
Business plan competitions: For an exciting twist, locales have also begun creating business plan competitions where companies pitch their business idea in a “Shark Tank” environment. The winner gets some seed money and in-kind contributions from local companies. Beyond the funding, competitions can drive word-of-mouth for a small company and provide a network of seasoned business owners to support them in their earliest stages.
Partners/Investors/Angels: No, the money you receive from bringing in a partner or investor certainly is not “free,” except to the extent that it is not money that originates out of your own pocket. If you’re awarded such funding, you can bet that there will be plenty of strings attached.
The bottom line: While federal funding may be unattainable for most small businesses, there is money to be found. Paying particular attention to local sources may help. Indeed, lots of city or statewide groups have a vested interest in finding and developing viable small businesses, especially ones that can contribute to their economies and help create jobs. Targeting programs like that can help you find monetary success and help you become a thriving part of a local community.
Learn more about financing for your business by visiting our Credit and Lending Resource Center.
About Steve Strauss
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business Success.© Steven D. Strauss.
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