If you've seen the late night infomercials promising you an unlimited supply of free money from government grants, you may wonder about the claims. Your best advice concerning such offers to buy a book of secrets concerning such grants is to save your money.

Finding Startup and Working Capital

Every successful and growing small business has a constant need for cash and working capital. In fact, many people with great ideas are waiting to launch while looking for seed capital to fund their concept. This makes the idea of grants from the government and other sources very enticing. However, the reality is much different.

There are very few government sources you can tap into for your startup capital, for growth funding, or for other objectives, with the possible exception of some research and development efforts.

The Government's Role

While local, state, and federal governments wants to encourage the creation of jobs and new businesses, the programs they back normally have very stringent and specific controls and guidelines. While there are very few grants for general business needs, there are a number of government-backed loans and programs.

For most businesses, the best alternative is to spend time understanding the programs offered by the U.S. Small Business Administration. While many people have heard about "SBA loans, the SBA does not provide any grants or even offer loans. (Discussed below is the one area the SBA does have some grant opportunities.)

What this government agency does is provide guarantees to financial institutions that loan money to small businesses. Contrary to general conceptions, it is the local lender, not the SBA, that decides whether or not to grant a loan subject to SBA guidelines.

Small Business Administration Loans

The SBA actually works with a list of authorized SBA lenders and commercial banks that specialize in SBA loans. There is a great deal of information on the SBA website concerning how these loans work and what they are intended for.

Basically, SBA loans work like normal business loans, with the risk of making such a loan minimized by government guarantees to the lender. There are certain specific criteria and requirements for several different types of loans, including those for:

- Startup and growth capital
- Purchase of real estate and certain equipment
- Disaster recovery
- Export activity

You will still have to go through normal loan applications and credit checks if you pursue a SBA loan, but if you qualify your lender will be more willing to take a risk on you because of the guarantees they receive.

The information at SBA Loans Explained and the Financing Wizard at Business.USA.gov will provide you with a lot of useful information and help you determine if there is a loan program that meets your needs and fits your situation.

Where You Might Find a Grant

While the probability of a grant for general uses is very small on the federal level, there are some states and localities that offer grants and other financial incentives to startups and growing businesses. Some areas have incubators that offer free office space and other resources in the place of financial grants.

There is, however, one area of federal programs that might benefit your company if you are involved in certain areas of scientific research and development. The Small Business Innovation and Research Program is administered by the SBA and provides small grants each year to qualifying companies. In 2014 there were 300 such grants totally just over $600,000, so you can see the individual grants are quite small.

Chasing the Cash

Working to find startup and working capital is a central part of small business and entrepreneurship. Instead of counting on grants, start your search at your local SBA office or one of the many Small Business Development Centers.