Entrepreneurs looking covetously at the multi-billion dollar bailouts for banks and automakers should stop dreaming: securing funds for small businesses has always been and will continue to be tough.

"We are getting a whole bunch of folks coming out saying ‘Where's my handout?' There is no handout," insisted SCORE network advisor Steven Bloom, who coaches entrepreneurs on how to seek funding from government and private-sector sources.

Bloom said financing for small business has always been a hard sell, because owners typically don't have the collateral to justify the risk to the lender: "There historically are no grants for small business or even for large business; unless you have the next cure for cancer or some other opportunity where scale is huge and the people launching it have a tremendous track record."

OUT OF POCKET INVESTMENT

Most entrepreneurs leverage personal assets, like homes, retirement savings and credit cards, to cover their startup costs and tread water long enough until they can realize some real revenue.

When Michele Justice considered leaving her government job of 17 years to start her own personnel security business, she believed she could easily get funding.

"It wasn't until about my third year that the banks were interested in even talking to me," said Justice, a Native American of Navajo descent, who lives in Albuquerque, New Mexico.

That was only after she had shown she could keep her business afloat. Justice was also able to get certification as a small, disadvantaged business by the federal Small Business Association, which helped her get bank financing. Justice's company, Personnel Security Consultants Inc, now employs 18 people and has won investigation contracts with Native American tribes across the country.

OBAMA'S RECOVERY ACT

President Barack Obama is attempting to keep his pre-election promise of increased funding for small businesses through his Recovery Act, which he signed into law in February.

The legislation committed $15.5 billion to help stimulate lending to small business, most of which was to be used to buy securities backed by pools of SBA loans sold by banks and other financial institutions.

The Obama initiative also upped the percentage of SBA-guaranteed loans from 75-to-90 percent and temporarily eliminated fees for borrowers on 7(a) and 504 loans, the SBA's two most popular loan programs.

Recently, the SBA also announced it was broadening eligibility criteria for its loan programs to allow an additional 70,000 businesses to be able to apply for assistance. The rapid moves were meant to address spiraling small business loans, which had ground to a halt with the sudden collapse of U.S. capital markets last October. SBA communications director Jonathan Swain admitted that before the new provisions were implemented, the number of SBA loans had plunged by 50 percent.

"What we continue to hear from small businesses around the country is that access to capital is critical for them right now," said Swain, who claims the new measures have led to a 25 percent jump in SBA loan volumes since March. "It's an early indicator, so we are going to continue to watch it closely, but we think these provisions are doing exactly what they were intended to do."

Not everyone is convinced. George Cloutier, founder and CEO of American Management Services Inc, has yet to see any of the new money getting into the hands of the hundreds of entrepreneurs he meets every week.

The leading advocate for small business has spent the last few weeks traveling the country, speaking to entrepreneurs about how the economy is affecting their companies. "For the last four dinners we've asked the question: Have you got any money from the SBA at all? And it's a total zero," he said. "Literally no one has raised their hand out of a thousand people."

NON-TRADITIONAL FUNDING ROUTES

Internet mogul Josh Baer, who co-founded the venture capital firm Capital Factory, is doing something a little less conventional to help entrepreneurs. He and a team of 19 other mentors launched a national contest to find five entrepreneurs to help fund and mentor. The winners all received $20,000 in seed money in addition to free access to office space and expert legal, public relations and financial advice.

Baer, who launched the e-mail marketing firm SkyList in his dorm room at Carnegie Mellon University in 1996, feels the opportunity will benefit both the winning companies and the economy.

"We realized with everything going on in the economy right now that there is a real need to continue to foster startups," said Baer. "The startups that are created now are going to be the ones that three or five years from now are going to be booming and growing as we come out of the economic challenges that we're facing."