7 Tips To Avoiding Scams In Free Grants

7 Tips to Avoiding Scams with Free Grants

You probably have more than one idea lurking in your mental closet somewhere right now only you don't have the necessary funds to turn your ideas into something bankable. No worries. You are not alone. In fact, many individuals are looking for grants or "free money" to put their ideas to work and start their own business.

Getting free money from free grants is easy. The Internet and classified ads say so. Here's one example lifted from an email:

"Free money! Never repay cash grants for personal needs, medical bills, education, business, debt consolidation, and more. For only $29.95 (plus shipping), we can send you 7 publications that have all been stamped 'WINNER OF THE PRESTIGIOUS EXCELLENCE IN PUBLISHING AWARD', plus 90-day money-back guarantee!"

Why, from this advert alone, you can say that lots of money is out there just for the taking!

Or is it? Is there really free money out there for small and home-based businesses? Can you really turn your ideas into dollars with money from free grants? And do people really give free money just like that?

The answer is "Yes" and "No."

The Truth about Free Grants

It is true that there are hundreds of millions of dollars in grant funding available free to entrepreneurs and small business owners. This money comes from various sources, including government, non-governmental organizations, and private institutions.

In fact, the Federal Government of the United States allocates no less than $67 billion in grants awarded to deserving organizations and individuals. These federally-funded grants may come in the form of community-based projects, such as street-paving, student financial aid, health services, etc.

The amount you may receive from free grants ranges from $5,000 up to some in the six figures. It all depends on how much money is available and the budget outlined in your project proposal. So if your project is large-scale, such as one that involves construction work, then the grant money you receive may be higher than most.

But best of all, what makes free grants truly tempting are the fact that they absolutely require no payback…. It is a grant, after all, not a loan. And that is precisely the reason why many people advertise free grants as "no-obligation free money."

However, the truth to adverts on free grants is only up to there.

For one, grants really don't have to be repaid, so there's no point (other than to deliberately mislead people) in labeling it as "free money." If something is free right from the start, then why call it 'free'? It is obvious that by giving it the name "free money," the purpose is nothing more than to defraud people into thinking that they are getting something for free because of the efforts of the person advertising such claim. The truth couldn't be any further from that.

As far as free money available for entrepreneurs who want to start a for-profit small business, funders may not be so lenient. There is no such thing as "no- obligation free money." Sure, with free grants, you are not required to pay back the amount, but the awarding of a grant may come with its own set of conditions, rules, and obligations that you have to comply with, or risk getting sanctions from your grant provider. And if your grant provider is the Federal Government, then you may even have to go to prison for non-compliance with the obligations of your grant. So you see how stiff the bargain can be – you get free money but follow all the rules.

Free money intended for starting or expanding a small business is nothing more than a myth. The truth is that most funding institutions do no provide grants or "free money" for starting or developing a business at all. Nor will they give you money so you can pay your medical bills, consolidate your debts, or pay for your education. No grant provider would even consider personal debts as proper subject matters of a grant.

The Small Business Administration, Bank of America Foundation, and other grant funding sources do not give capital to start a day-care or clothing design business, etc. Nor do they provide grants to individuals who will use the proceeds to start their own for-profit small business.

Grants are usually given only to serve a social good such as bringing jobs to an area, training under-employed youth, preserving a bit of history, etc. In fact, every legitimate granting source has very specific requirements about who might qualify for funding. So unless you have a project in mind concerning a particular community, grant money may not be available to you.

The Federal Trade Commission or the FTC, the nation's consumer protection agency, warns that "money for nothing" grant offers often are a scam. The grant is not free. It is not guaranteed. And often, it is not even available to you. To get a grant, you need to pre-qualify and apply for it first. If you don't qualify or if your application gets rejected, then the money and effort you spent on your free grant application would have been all in vain.

How Free Grant Scams Work

The FTC website explains how free grant scammers defraud people:

The ads claim that you will qualify to receive a "free grant" for your education, your home repairs, your home business, or your unpaid bills. They say your application is guaranteed to be accepted, and you never have to repay the money. Then, the ad will ask you to claim your "free grant" by calling a toll-free number.

Once you make the call, a representative of the company will ask you some basic questions. They'll be trying to determine if you qualify to receive a grant. Here's a short list of sample questions they may ask:

- What's your address? - How long have you lived at this address? - Do you have a bank account? - Do you have at least $150 in your account at this time?

After asking this set of questions, the representative will then ask you to hold while she determines your "eligibility" for the free grant. Later on, she comes back and congratulates you on your eligibility. Afterwards, she will then ask you to pay a one-time "processing fee" that can range from $95 to $200.

Naturally, you will question this fee. But then, she will reassure you that the grant is guaranteed, and that if you're not satisfied, you'll get a refund. However, she won't offer to tell you all the conditions for a refund.

So what does this processing fee mean? Supposedly, the money is used to cover finding a grant source and sending you the appropriate application package in the mail. But what do you get in the mail instead? Not an application. Not even a source. Rather, you will get a list of agencies and foundations to which you must write and request an application. Pretty sneaky, considering the fact that you can get the same information from any public library or the Internet.

The FTC clarifies that if you ask an agency or foundation for money for personal use, you probably won't get it, even if you are financially needy. Take not that it says "probably" so there is a chance that you may get it.

If, for instance, you are a student with a financial need to get to college, the Federal Government provides student financial assistance in the form of loans, grants, gifts, scholarships, and even jobs, to help you.

But again, that is not saying that the money comes with no obligations. For student grants, you may have to maintain a certain grade point average or write an essay with a socio-civic thrust in order to receive free grant money.

So now, the question left is how do you if a free grant offer is legitimate or not? Below are the top 8 tips to helping you steer clear of scams concerning free grants.

Tip #1: Presume that the ad is fraudulent.

Legally, this presumption is not tenable. As a general rule, fraud should not be presumed, but there are exceptions to this rule. One of these exceptions is when it concerns self-protection.

When you keep in mind that every advert claiming free money in grants is fraudulent, you are essentially just trying to protect your own interest. It is a form of precaution – reasonable, really, considering how many scam ads are running out there. You want to play safe, especially when dealing with ads of a highly suspicious nature as a "free money, no obligation" claim.

Don't believe anything you read or see. Always, ALWAYS check with legitimate sources of free grants before applying for any grant you find in the classifieds section.

The following are legitimate resources for information about government grants and benefits:

Catalog of Federal Domestic Assitance (CFDA.gov)

The online Catalog of Federal Domestic Assistance gives you access to database of all Federal programs available to State and local governments (including the District of Columbia); federally-recognized Indian tribal governments; Territories (and possessions) of the United States; domestic public, quasi-public, and private profit and non-profit organizations and institutions; specialized groups; and individuals. After you find the program you want, contact the office that administers the program and find out how to apply.

Hard copy of assistance programs is available for a fee through the Government Printing Office (202) 512-1800 or toll-free outside of the D.C. metro area (866) 512-1800.

Free Application for Federal Student Aid http://www.fafsa.ed.gov/index.htm

The Free Application for Federal Student Aid or FAFSA is run by the U.S. Department of Education. If you are a student seeking college grant, then your first step in the financial aid process should be FAFSA. The program allows you to apply for federal student aid, such as Pell grant, student loans, and college work-study. In addition, most states and schools use FAFSA information to award their financial aid.

Telephone hotline (800) 433-3243, operates Monday-Friday 8 a.m. to midnight Eastern Standard Time, Saturday 9 a.m. to 6 p.m.

GovBenefits.gov

GovBenefits.gov is a partnership of Federal agencies with a shared vision – to provide improved, personalized access to government assistance programs. The site offers an online screening tool that is free, easy-to-use, and completely confidential. Name, phone number, Social Security Number, or any other information that could be used to identify you is not required. All you have to do is answer a series of questions about yourself and then GovBenefits.gov will return a list of government benefit programs you may be eligible to receive along with information about how you can apply.

Telephone hotline (800) 333-4636, operates Monday-Friday 8 a.m. to 8 p.m. Eastern Standard Time.

Grants.gov

Grants.gov allows organizations to electronically find and apply for more than $400 billion in Federal grants. The site serves as an access point for over 100 grant programs offered by all Federal grant-making agencies. The U.S. Department of Health and Human Services is the managing partner of Grants.gov.

Telephone hotline (800) 518-4726, operates Monday-Friday 7 a.m. to 9 p.m. Eastern Standard Time.

Tip #2: The government doesn't telephone people or send unsolicited letters or emails to offer grants.

If you get an unexpected call from someone claiming to be an agent of some government agency or a representative and he offers you a grant, don't entertain it. Likely, it's a scam. The same thing goes with emails or letters you receive via direct mail.

The logic behind this is pretty simple. The funds allocated for grants are not limitless. Plus, they are public funds, meaning they come from taxes, so they must be used only for a public purpose. That is what taxes are for, after all.

Such being the case, government people just don't go around asking people to receive money from them, especially when that money isn't theirs to give away in the first place.

Grant money is given only to organizations and individuals who have a project in mind with the goal of improving the community or the country. There are many such organizations and all of them are vying to receive grant from government. In fact, the competition is so harsh that some organizations come at a point where they hire full-time staff workers to handle grant application and administer the project once the grant is awarded.

So then, if the demand for free grants is that high, why would government resort to calling people up to get their grants? As is most often the case, you will have to take on the active role in applying for grants.

Tip #3: Don't provide sensitive information to just anyone.

With the proliferation of scams these days, you should be more vigilant on whom to give your personal details to. The Internet is a rich source of information, and scammers and hackers are taking advantage of that fact. In fact, identity theft is one of the fastest-growing crimes not only in the United States but in most developed countries as well. You can help minimize the damage these people cause by exercising caution.

Don't provide your financial account numbers, Social Security Numbers, or other personal information in response to free grant offers. Crooks "phish" for that information to steal your money and impersonate them for other illegal purposes.

Tip #4: Government grants never require fees of any kind.

This should be obvious. When someone offers you "guaranteed" free grant opportunity for something like $24.95, you should be aware that this is not government practice. Most likely, that ad is a scam to steal your hard-earned income.

The Federal Government will not ask you for money when you apply for a grant. True that you may have to spend some of your own money when you apply, but these expenses are not mandatory. You do, after all, need to pay for printing your project proposal, and, if you didn't write your own proposal, for the grant writers you hired specifically for that purpose. Needless to say, any endeavor requires some sacrifice, whether it be in the form of money, time, or effort.

However, when someone asks you to pay them for information that is already freely available, then that is a whole new different story. What's more, the government doesn't require any fee, although they may ask you for your financial information in your application. But the information is only used to prove that you qualify for the grant you are applying for. The truth remains that you don't have to pay any amount, no matter how minimum, in order to get a grant.

Tip #5: Government grants require an application process.

Some grant providers even require stricter guidelines to follow when you submit your application and grant proposal. The bottom line is the government doesn't simply give grants over the phone. Furthermore, grants are never guaranteed.

Application for government grants are reviewed to determine if they meet certain criteria and are awarded based on merit. If you didn't apply for a government grant and someone says you are receiving one, then it's a scam, plain and simple.

Tip #6: Government grants are made for specific purposes, not just because someone is a good taxpayer.

Here's another common form of free grant scam. The email will tell you that because you have been faithfully paying your taxes and have no outstanding taxes in your account for so and so years, then the government has awarded you free grant money.

At face value, the email is just dubious and preposterous. Why would government award you for being a good taxpayer? Taxation is a constitutionally safeguarded power of the State. They don't need to provide you with grants so you continue to pay your taxes. In the first place, it is your duty to pay your taxes whenever it is due.

Secondly, most government grants are awarded to states, cities, schools, and non- profit organizations. The purpose of grants is to help provide services or fund research projects. Rarely will a grant be given to private individuals so they can get out of their debts or other personal financial circumstances. When speaking about grants for personal use, what is meant by this are grants for things like college expenses or disaster relief programs.

Tip #7: Don't be fooled by official or impressive-sounding names.

This is a very common trick employed by scammers and swindlers. Apparently, more people fall for their scams if they associate themselves with well-known names, or even unknown names, as long as it sounds important or official.

Swindlers claiming to provide or help get government grants often invent impressive-sounding names and titles for themselves and the companies they represent. They operate under many different names and phone numbers, take your money, then leave town to start all over again in some other town.

Going back to the first tip, always presume that the intention of these people is to defraud you. Before acting on the ads, make sure that you verify the information contained therein.

Bonus Tip: Beware of services offering government grant information for a fee or requesting personal information to provide it.

As mentioned earlier, information concerning government grants is free. Use the resource websites we provided under Tip #1 for grant information.

And last, the FTC also provides some additional tips to help you avoid free grant scams:

- Be vary wary of anyone who promises or guarantees they can get you a grant or a loan, particularly if you must pay in advance for the service.

- If you are tempted to respond to one of these offers because of a money- back guarantee, be ware that they may impose so many conditions it could be difficult to ever get your money back.

- If you are experiencing financial problems and believe you may qualify for some kind of aid, check with your city or state unemployment or social assistance office.

- Check the Better Business Bureau for complains about a company before sending money.

- Advertising in recognized media outlets or on the Internet does not guarantee the legitimacy of the company behind the ad.