Financing a start-up business can be done through grants.
If your entrepreneurial spirit has inspired you to start a company, you likely need an initial capital investment and an established revenue stream or line of credit for a period of time--months or years--until your company turns a profit. A number of options are available for achieving start-up financial goals from selling stock securities in the company to conventional bank loans; however, you may be eligible for grants from government and private sources. These have favorable terms in regard to interest and penalties, if any, and duration between receipt of funds and expected return on investment to the grantor.
Grants from Family and Friends
Your state may have a business start-up program such as the Small Business Development Center of Maryland, a regional business support program affiliated with the Small Business Administration. Use this resource if you intend to ask friends or family for seed money in the form of grants. As with government grants, one from an individual with personal ties to you will require an agreement of terms that may or may not require payout terms, but should always be written into an attorney-approved contract; web resources such as Findlaw.com can help you locate a local attorney who specializes in start-ups and funding them. The U.S. Securities and Exchange Commission has very strict rules on grants that include stock options, so have your attorney or local business development center help you avoid legal pitfalls in this area as well.
Angel Investment Networks
The Angel Capital Association defines angels as well-off individuals who make stock-based investments in promising start-ups. Most angels are business professionals interested in specific market sectors, technology for example. The Center for Venture Research estimates that angels invested $19 billion in start-ups in 2008. To find angel investors in your sector do a state-by-state search for angel networks. For example, in Colorado you might find an angel investor specializing in your field through the Rockies Venture Club; this membership organization connects entrepreneurs with angels from its offices in Boulder. Most states have similar organizations because most angels use them to maintain some degree of anonymity and control over the number and type of business plans submitted to them.
Government Grants
Per the International Accounting Standards Board, a government grant is a supply of cash resources--conditionally, unconditionally or for reduction in liability--based on agreement and fulfillment of terms between the grantor and grantee. Grants.gov is a good place to start a search for start-up funding from government sources. In 2010 the site listed more than 600 domestic and international grants for business services and companies performing everything from post-invasion habitat restoration through the U.S. Department of Wildlife to developing ocean science education programs through the National Science Foundation. The U.S. Small Business Association is also a good source for start-up grant information. It has links to 15-plus government agencies that offer grants to start-ups; these agencies include, but are not limited to: the National Park Service, Housing and Urban Development, U.S. Department of Transportation and the Departments of Labor and Justice.
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