Grants For Small Business - Are They For Real?
Grants For Small Business - Are They For Real
?
As wonderful as it might sound to obtain a government grant that you don't have to pay back, such grants don't really exist. You didn't think small business financing was that easy, did you?
While the federal government does not provide grants for starting or growing small businesses, it does provide a myriad of services to assist entrepreneurs in pursuit of their dreams. One of the mechanisms in place to promote small business growth and economic development is the CDFI Fund managed by the US Department of the Treasury. In the current fiscal year the federal government is allocating more than $12 Million to support CDFIs.
CDFIs fall into three categories:
Community Development Loan Funds
Community Development Credit Unions
Community Development Banks - Including Thrifts and Holding Companies
Community Development Venture Capital Funds
The genesis of the CDFI Fund was the Riegle Community Development and Regulatory Improvement Act of 1994. The reason for the fund's existence is to foster economic revitalization and community development.
All participants in the CDFI program go through a certification process conducted by the Treasury Department. The certification enables CDFIs access to a variety of programs offered by the Fund. These programs provide financial and technical assistance to CDFIs through the CDFI Program, the Native American CDFI Assistance Program, the New Markets Tax Credit Program and the Bank Enterprise Award Program.
Small business owners should pay particular attention to the offerings provided by the CD Banks, CD Loan Funds and CD Venture Capital Funds.
CD Banks offer a wide variety of financial and consulting services to individuals and businesses living and operating in underserved or economically disadvantaged areas.
CD Loan Funds are set to to offer development and financing services to businesses, organizations and individuals in low-income rural and urban areas. They serve a variety of organization types including microenterprises, small businesses, and housing and community services organizations.
CD Venture Capital Funds are an excellent source of equity or near-equity financing for small businesses in underserved neighborhoods. Many of these funds provide business consulting services in conjunction with financial services.
While Community Development Banks are for-profit institutions with significant neighborhood representation on their boards of directors, Community Development Loan Funds are usually nonprofit entities. Community Development Venture Capital Funds can either be for profit or not-for-profit institutions.
CDFIs provide services around the nation to underserved and low-income populations. There are also a subset to these entities that focus on areas of extreme economic distress, including the Mississippi Delta, the Gulf Opportunity Zone, Native Communities, Colonias, and Appalachia.
If your small business operates in a area of that is underserved, has a significant low-income population or in an area of extreme economic distress, you should investigate how a CDFI can assist you in growing your business.
Michael Saunders has an MBA from the Stanford Graduate School of Business. He edits a site on Government Grants for Small Business and another on Ideas to Start Your Own Business.
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