"Government" Grant Scams

Know the facts when you're approached with the promise of free money.

Whether you’re new to business or you’ve been around for decades, at some point the prospect of accessing “money for nothing” has likely been presented to you. Sometimes the information is obviously illegitimate, coming through your TV or e-mail, but it’s harder to catch a “friendly” phone call claiming to work for a “federal” entity. Remember what your mother or father told you when you were little? “If it’s too good to be true, it probably is!”

The prospect that government grant money is readily available is the ultimate lure, and while in certain circumstances it can be an attractive option, many times it can also be a malicious trap set by criminal scammers.

The Genesis of Grant Scams

Tracing the origins of “grant scamming” dates back as early as 2004, when criminal scammers used phone calls such as the one above to access business banking accounts. The fictitious phone call which was generated above for this article was inspired by an actual phone call found on snopes.com. This unsuspecting business owner received a similar phone call from scammers four years ago, and was able to catch himself practically mid-sentence before giving his account information.

The thought of being able to have all that money might conflict with your reason, and as scammers become more and more clever, even the smartest businesspeople can become victims very easily. While nothing can ever 100 percent ensure that scammers won’t harm you at some point, there are some key things to look for when your scammer antenna detects that something might not be right.

How to Spot a Scam

First and foremost, you need to know that the government will not pursue you to give you a grant—you must pursue the government. If you receive a phone call that you’ve been “pre-approved” for a $10,000 government grant or something similar, unfortunately it is not your lucky day.

Second, be aware that accessing a government grant is a long and competitive process, not an overnight affair. According to the Purdue University Research Foundation, the initial application and interview procedure for a government grant alone can take anywhere from six months to over a year to complete. If you are getting mail or other solicitations claiming that you’ll be able to access funds in a matter of weeks, a big scam alert should be going off in your head.

Another trick scammers have learned well is to incorporate the word “federal” in their organization names. According to Webster’s Dictionary, “federal” doesn’t mean “government.” In the basic sense of the word, “federal” does mean “national” or suggest a government affiliation. However, unlike the .gov Web domains, which are distributed only to government entities, the word federal unfortunately does not have the same exclusiveness. A trick that both scammers and legitimate grant services have used to get you into their grasps has been to use the word “federal” in their actual company name or Web domain. This does not mean that they are involved with the government and instead is often a malicious way to earn your trust.

The Real Deal

In this day and age, every government agency or affiliate has an online presence. Be sure to visit the grant originator’s website before giving out any information. Only the United States Postal Service (usps.com) and military branches (goarmy.com, navy.com, etc.) have .com addresses. The institution you are contacted by should have a .gov address if it is truly dealing with government grants. Great government websites to access grant information are grants.gov and govbenefits.gov.

If you are interested in starting your own business, the government will many times award thousands and even millions of dollars if your business is bringing relief to a specific sector or forward progress to a federal initiative. For instance, there are numerous government grants available for entrepreneurs in certain census areas (low income, moderate income) who want to start daycare centers for children. These specific grants are in place so families can get jobs rather than have to stay at home with the kids, therefore the parents are helping boost the surrounding community’s economy.

There are also millions of dollars in grant money available for entrepreneurs who are developing fuel cell technology, fitting into the government initiative of shifting our economy from oil dependency to other energy sources. Depending on your skill sets and if your expertise fits with these government initiatives, money is available. E-mail updates are available by going to the government grant sites above.

While it might seem the grant horizon is filled with nothing but criminals, there are in fact good guys. Finding people to help you through the government grant process is fairly simple if you are friendly and don’t mind picking up the phone. Grants at the federal and state levels have full-time staffers to help with your application or other questions. You can reach one of the government call centers at (800)518-4726. The Contact Center hours of operation are 7 a.m.-9 p.m., EST, Monday-Friday.

Stay informed and don’t be afraid to do some hard research on the grants you are trying to get for your business. It won’t be an easy process, yet if done correctly, could provide the capital you need. While there are some legitimate companies out there that help with the application process, the safest idea is to put your trust in government-affiliated contacts.

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Reader Comments

Monday, September 8, 2008 at 10:28 AM
Gary says:
this site has legit programs

Wednesday, July 23, 2008 at 12:58 PM
Biz Guy says:
wow, what a great article. Looking forward to reading more like this!

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