The late-night TV infomercial is so alluring: “Come to our seminar and locate out how you’ll be able to get your govt grant to start out a modest enterprise!” a breathless announcer intones. “Just $300.” A smiling entrepreneur assures in a taped testimonial: “I got $40,000 for my modest business!”

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 business owners and would-be entrepreneurs who can’t wait to get their hands on that totally free authorities cash – which doesn’t exist. Why are people who supposedly would like to be hard-headed, no-nonsense business sorts so gullible? This is usually a subject the Smart Answers column has addressed prior to, but I periodically revisit it. That’s simply because these aren’t harmless hoaxes. Seminar sellers and guide hucksters routinely con individuals into shelling out hundreds of dollars to hear lectures or buy directories that contain facts readily readily available (yes, actually for free!) in any public library or on the internet.

“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 on the Lloyd Greif Center for Entrepreneurial Studies in the University of Southern California. “Interest and calls peak when some new ebook or ad kicks in.”

“BRIGHTEST TECH MINDS.” Common sense and also the most basic awareness of organization principles really should tell business owners that no a single besides Mom and Dad (maybe) will give you no-strings income to begin a for-profit business. “If the government was within the position of providing all of the funds free of charge to individuals who commence their own organizations, we wouldn’t last prolonged,” says Mike Stamler, a spokesman for the U.S. Little Organization Administration in Washington, D.C. “Not to mention that the American men and women would in no way stand for the govt setting individuals up in enterprise at no price, 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 enterprises. A look in the details shows the funds is hardly cost-free. It comes with a host of restrictions and quid pro quos. As an example, some local agencies give small grants to enterprises that locate in poor areas and guarantee jobs to folks in an underemployed community, says Phil Borden, director with the Women’s Enterprise Advancement Corp., a Extended Beach (Calif.) nonprofit organization assistance center.

You will find also some extremely restrictive, difficult-to-obtain grants given to tiny corporations to study new technologies for the authorities. “There is some thing referred to as the Modest Enterprise Innovative Exploration (SBIR) program that gives entrepreneurs up to $100,000 to investigation an thought that is considered promising and as much as $1 million to create products from it, if the analysis pans out,” Borden explains. “The dilemma is, the promising ideas need to do with things like how you can capture a satellite in orbit and repair it. The folks who compete with intricate, detailed proposals for these grants are experts in engineering and science and have the brightest technology minds within the country. The notion that this kind of cash is readily available to folks off the street is often a joke.”

Ready VICTIMS. Still, the free-money hucksters come across ready victims due to the fact people need to believe there’s a way around the very difficult work of raising capital. “So numerous men and women say they heard it from a friend or saw it on TV. Of course, they’ve in no way in fact met anybody who got any no cost dollars. It becomes like the Holy Grail of smaller business, and loads 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 with the heart of it implied that these grants were there, but the administration didn’t want to let everybody know about them,” Stamler recalls. “He told folks not to take ‘no’ for an answer when they called us.”

Rooney says he once ordered a “free-money” ebook advertised on television.The author claimed each and every entrepreneur was entitled to a authorities grant. Rooney received a directory of farmer’s subsidies, Housing & Urban Improvement programs, and government-loan applications.

What about those testimonials from happy entrepreneurs? Listen closely, Stamler says. They usually say they “got” so much govt dollars for their modest organization – they don’t say how. Most of those featured business owners 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’ll find many sources of loans or equity financing for startups. “Money’s not that difficult to get from friends and family if you’ve got a actually good notion,” 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 quite a few millions to get off the ground.

As Jim Weidman, spokesman for the National Federation of Independent Enterprise points out: “Most new businesses are started with a really little 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 enterprise that needs loads of initial funding for inventory, working capital, or buying or leasing a building.”