The U.S. Minority Business Development Agency says there is no free money to buy a business.
The prospects of getting a grant might be appealing to minority entrepreneurs on the hunt for funds to buy a business. If these grants actually exist, they are well-kept secrets. Government agencies are not authorized to award grants to start, purchase or grow for-profit businesses. Private foundations invite risk of severe tax penalties including possible loss of their tax exempt status for doing the same.
General Rules Governing the Awarding of Grants
The Internal Revenue Service, IRS, sets the rules for awarding grants by private foundations. Federal, state and local government agencies all seem to follow these rules with few exceptions. Among other requirements, the IRS states that private foundation grants must go for charitable purposes and that grants further tax-exempt purposes. The IRS further declares that, "Violations of these provisions give rise to taxes and penalties against the private foundation and, in some cases, its managers, its substantial contributors and certain related persons."
Government Grants
The Minority Business Development Agency, MBDA, speaking for all federal agencies, is quite explicit on its website in stating that the federal government does not provide grants to for-profit businesses. "There is no 'free' money for you to start or grow a business." It follows that MBDA's reference to free money most likely includes grants for buying a business. The University of Missouri Extension speaking for most state agencies, cautions on its website that grants from a government entity are only given for specific purposes. Grants must satisfy the mission of the granting agency and serve a general public purpose.
Private Grants
Given IRS rules restricting private grants only for charitable and tax exempt purposes, most foundations steer clear of potential hazards and award grants only to entities meeting the IRS definition of acceptable grant recipients. For example, the BJH Foundation of North and South Carolina says the Foundation makes grants only to nonprofit charitable organizations exempt under Section 501c3 of the IRS Code or to government agencies. While grants for minorities to buy businesses may very well exist in theory, all credible indicators suggest the time and money invested in searching for such grants would be better spent in more productive endeavors.
Real World Solutions to Funding Minority Business Purchases
The traditional sources for funding a business purchase are self financing, equity investors and loans. Government agencies can be a great help to aspiring minority business owners by providing financing assistance counseling to help you navigate through the many financing options. Governments also offer a variety of guaranteed loan programs for buying, starting and expanding a business. Government loan programs do not involve free money. But, government is the lender of last resort. You can get more information on minority business development programs, including buying a business, by visiting the MBDA website or a local MBDA minority business center. The MBDA website has a search engine to locate a business center near you.
Tags: free money, grants only, Minority Business, award grants, business center, Business Development Agency, buying business
