From the March 2011 issue of Entrepreneur

"Free money, just for the asking. Hundreds of grants available right now!"

Sound familiar? If you have a TV, it probably does. And sadly, many people believe it.

Are there grants for small businesses? Yes. Are you likely to find one to help start yours? Probably not.

Here's the reality: The largest source of grants available to private businesses is the government. The good news, at least at the federal level, is that they're easy to find. Simply go to grants.gov, the federal government's database, and search by category, agency and eligibility criteria. At recent count, about half of the 1,300 open grants are available to small businesses.

The bad news is that many of them are so obscure that most entrepreneurs would be hard-pressed to pronounce them, much less qualify for one.

Here's a sample of what was on offer in December:

  • Research opportunitieson Spasmodic Dysphonia
  • Focal cognitive deficits in CNS disorders
  • National Gene Vector Biorepository and Coordinating Center

A check of other open grants leaves little room for hope for the local pizza shop or video game developer, but the list is worth a gander if you're in a business that addresses one of Uncle Sam's targeted causes. At the end of last year, that included job training, education, pollution reduction, serving disadvantaged populations, military needs, alternative energies and breakthroughs in medicine, agriculture and energy.

Then there are charity, corporate and foundation grants. These organizations have millions on offer at any given time, but most are restricted to nonprofit and educational applicants. Still, if your project pertains to the arts, education, science or a similar cause, you might be able to tap this pool either directly or in cooperation with a nonprofit organization.

Keep in mind that even if you do qualify for a grant, responsible organizations and government agencies expect something of value for their beneficence, such as useful research or job creation. Many require matching funds from your organization or other sources.

This may sound pessimistic, but unfortunately, it's true. The "free money" myth has persisted for too long because unscrupulous peddlers find entrepreneurs--desperate to fund their dreams--easy to trap in their snares.

Don't believe me? Here's the opening sentence on the U.S. Small Business Administration's web page on grants: We've all seen the headlines: "Millions in free government money for your business." Late-night infomercials and Internet advertisements promise grants to start or expand a business. Sound too good to be true? It is.

The best advice for most entrepreneurs is to forget about relying on grants. Concentrate instead on starting a business that's financially feasible without grants--or, for that matter, loans or investments--and the money will follow.