Smart Money: Minority entrepreneurs must explore all funding avenues

Dear Bruce: I am thinking about starting my own business for the first time. I am of Hispanic descent, female and a U.S. citizen. I have heard several times that there are government grants for small businesses, especially for minorities. Is this true? If so, where can I apply for such a grant? I have searched the Internet looking for them and have found companies asking for money to put in an application. I’m skeptical of spending money for an application that a government agency should be providing – especially since the application requires an extensive amount of personal and confidential information. —Reader, via e-mail

Dear Reader: You have to differentiate between a grant and a loan. There are many loans, but I know of few grants or gifts. The first thing you might consider is going to a bank that handles U.S. Small Business Administration-guaranteed loans for small businesses. This way, the bank is protected for 80 percent of the loan, and, as a minority female, you will get preferential treatment.

As to companies that charge for a grant, but you are right to be skeptical. However, there are people who do require help, and this is the reason that consultants are in business. You will discover that, in order to apply for these subsidies, you will be required to provide personal and confidential information. If you’re caught fudging, you can kiss any possibility goodbye.

Franchises offer help, not creativity

Dear Bruce: I am currently evaluating the possibility of purchasing a franchise, but I’m in the early stages and would like to know what you would recommend in terms of research. —Reader, via e-mail

Dear Reader: First of all, you have to understand the reasons that franchises are attractive in many cases. Successful franchises that have been around for a while have a far lower failure rate than brand-new startups. There is also the important area of brand identification. When you drive up to, say, a McDonald’s, you know what kind of french fries and hamburgers to expect. When you drive up to Bruce’s Drive-in, you’re not necessarily sure.

The downside is that you will have a partner for life. You are not allowed the individuality that you would have in your standalone enterprise for the obvious reasons. The core of the franchise is uniformity, and if the franchisers allowed your unit to put Swiss cheese on hamburgers, that departure would dilute the value of the franchise.

There are dozens of books available in your library that can provide some insight into franchising. Just be aware of the licensing requirements in your state, and be certain to check credentials of the franchiser very carefully. Substantial amounts of money are required up front from the established franchisers. Understand that while you have a far better chance of success than a startup, there is no guarantee of success. Established franchises can go down the toilet.

Absentee businesses require strong knowledge

Dear Bruce: Some time ago, you mentioned there are many businesses that can be run semi-absentee. My husband and I have been looking for a “legitimate” business for some time. It can be home-based or otherwise. Can you offer some pointers? —Reader, via e-mail.

Dear Reader: The difficulty with absentee or semi-absentee operations is that you must understand the business. The owner who doesn’t know the business intimately can easily be skimmed, and he’ll never know it’s happening. Cash enterprises are the main target, but they are not the only ones subject to abuses of this kind. It’s my contention that before folks like yourself go into an enterprise, you would be well served to find a job on a part-time basis in that field. This way, you learn from the inside about how the business should be run and whether you have an affinity toward that type of an operation.

The hard fact is that not everyone is meant to be an entrepreneur. Whether or not you are running this absentee, if the door has to be kept open and a service performed, and your employee doesn’t show up, guess who will be working? I would consider this before jumping in. When you see “opportunities” advertised for making a ton of money at home, run the other way.

Retirement planning for the self-employed

Dear Bruce: I am a single, self-employed woman in my late 40s, and I have no children. I live paycheck to paycheck. I have a Roth individual retirement account to which I’ve been contributing $2,000 a year for the past 15 years. I also have mutual funds and stocks. At this time, with all my funds, I have about $40,000 invested. I’ve been told to stay put. What else can I do? I feel this is not enough. I know the market has been up and down lately. Should I be taking more risk at this time? —D.M., via e-mail

Dear D.M.: It seems to me you’re doing well. Yes, the market is a bit risky right now; however, you’re not in for the short play but the longer one. You should continue to make your contributions as much as you are able, taking the tax advantages available to a self-employed individual. When you say you’ve been told to stay put for the future, I’m not sure what that means unless someone who has seen your portfolio said it is reasonably diverse. You have to determine your risk tolerance. If you are the type of person who can’t sleep at night when there’s the slightest chance of your portfolio being worth less the next morning, then you are unfortunately condemned to a very low return in today’s world. Given your relative youth, I would think that a fairly aggressive stance over the long haul would be to your advantage.

Bruce Williams is a national radio talk-show host and syndicated columnist. He can be reached at bruce@brucewilliams.com.[[In-content Ad]]