There's No Free Lunch Most Entrepreneurs Have to Bootstrap or Borrow
Grants are for nonprofit concepts, or high-powered research
Q: I am a minority woman interested in starting a law practice with
two other women. We are in need of startup capital, preferably grant money.
Do you have any suggestions as to sources of funding?
--S.H., Newark, N.J.
A: The notion -- still surprisingly prevalent after years of ebbing
political support for affirmative action or publicly funded community development
-- that the government or private foundations give away "free money" to
for-profit startups is a myth. Such entities typically channel their funds
to nonprofit groups serving the community or to companies that do research
and development feeding crucial government projects. If you are open
to establishing your company as a nonprofit and are interested in providing
legal services to an underserved group or community, you might qualify
for funding from the private foundations or government entities already
helping that population. After you're established as a nonprofit, you
could later begin a for-profit side of the firm. A couple of caveats: You
must truly be providing valuable services to people or businesses that
need your help, and you must ensure that the nonprofit and for-profit
sides of the company remain separate.
Get a directory of foundations, available at most large reference or
university libraries, and read up on their missions, whom they are interested
in serving, and how to write grant applications. If you find a good match
for your location and interests, this would be one way to fill a community
need and get your practice off the ground.
If you're not interested in going the nonprofit route, you'll need
a loan to get started. Here also, there is help available -- both in arranging
funding and in all kinds of good counsel. Visit your local U.S. Small Business
Administration office and speak to a counselor at one of the SBA's Small
Business Development Centers. Or find a business development program through
a local university that works with startups. Experts at these places can
put you in touch with community lenders, some of whom provide low-interest
loans backed by SBA guarantees to low-income entrepreneurs or businesses
that plan to locate in geographic areas that have been identified as undercapitalized.
The SBA has a loan guaranty program through which entrepreneurs who
do not qualify for traditional bank loans can get funded with underwriting
from the SBA, says D.J. Caulfield, a public information specialist at SBA
headquarters in Washington. "If the SBA feels the enterprise is a
reasonable venture, we place our exposure for the potential of a default
at about 75% or 80%, and the bank underwrites the balance of that exposure,"
Caulfield explains. "Our loss rate is extremely low, so the program, called
the 7(a) Loan Guaranty Program, has done quite well. And it is open to
any business, not just minority- or woman-owned companies."
The American Bar Assn. provides information and advice on starting
a law firm through its Law Practice Management Section, which can be accessed
at the organization's Web site: www.abanet.org/lpm. It publishes a 376-page
book, How to Start and Build a Law Practice, that can be ordered at the
site or from the group's Chicago headquarters at (800) 285-2221. The book
is $65 in hardcover and $39.95 in softcover.
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