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Thursday, October 10, 2013

4 Ways to Identify Small Business Grant Scams!

It's not easy to find grants (free money) for small businesses. So, like the saying goes, if it sounds too good to be true, it probably is. There are a number of red flags to look for to help you identify a scam. Here are a few to watch for.

1. Government grants are scarce

The U.S. government does not give grant money to small business to start or expand a business. Those that are offered will be listed on the U.S. Small Business Administration web site and they are given for very specific areas of research focus by government departments. Government grants require very stringent compliance and reporting measures to ensure the money is well spent. Those that are available are through the departments of Agriculture, Health and Human Services, Transportation, Education, Energy and others. Anything else is most likely a scam.

2. Real grants do not ask for money

The purpose of grants is to provide funding in the form of money that does not have to be paid back. Scams will ask for money up front, and it can be considerably large in the promise of more money when the grant comes, which it never will. Never ever send money or allow the use of your credit card to pay for any fees or to pay for information on grants and assistance in securing them.

3. Real grants have detailed eligibility requirements

Real grants are not easy money. Grants are given for specific areas of interest by the grant donors. Companies eligible for these grants will have to provide a business plan, a detailed budget, an explanation of how the business will be funded on an ongoing basis, and an explanation of how the grant money will be used. Scams do not ask for this level of detail.

4. Real grants will not ask for bank information

Legitimate grantmakers are only concerned about how your business is going to fit in with their mission, how it is going to benefit communities and people, and how stable the business plan and future of the business is. They may ask you how much is needed, or the grant may already be a specific dollar amount. Either way, you will have to provide a legitimate budget that explains how the grant will be utilized. But they will never ask for your bank information. This is a huge red flag for a scam.

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