Grant Programs: the basics

Grant programs are a very attractive option for funding the creation or expansion of a business. Unlike business-focused loans, government-sponsored grant programs do not require full repayment of either principal or interest. Some require no repayment at all, while other grant programs entail partial repayment. Grants, as a result, can provide a considerable boon to any business; much needed funding with no or minimal long-term financial liability.

The basics of applying to grant programs

As is the case with a traditional loan, grants involve an application process. Each grant involves specific requirements for eligibility and terms for their award. The specific details of grant programs are set by the sponsoring government entity, and warrant some research before an application is submitted.

While preparation and time is involved in applying to grant programs, there is an additional benefit to being awarded a grant. By successfully completing the application and qualifying to receive a grant, businesses have demonstrated they meet financing eligibility requirements of a specific agency. Should there be a future need to apply to grant programs, this can provide a leg up over the competition.

Available grant programs

There are four basic types of grant programs available. Determining which one or ones to focus your application efforts upon depends greatly upon your businesses needs and financial health.
  • One-time grants – Single use grant programs are intended to address a specific need at a specific time. This could involve financing for equipment purchases, staff training or research for a business plan.
  • Renewable grants – Sometimes businesses face an ongoing need, such as facility renovations or new facility purchases. For these situations, renewable grant programs may be a better choice. Typically, as a project moves to a new stage or as needed, when there are new developments in a business plan, the funding renewal process can begin. These grants commonly require adequate record keeping during the project in order to renew a grant.
  • Equity financing – Established companies may wish to consider equity financing. These grant programs entail the government receiving a share of company profits, typically royalties or stock, in lieu of repaying the entire funding. An established history of successful operations, prudent financial management and consistent growth is required by most equity financing programs. As a result, startup ventures are unlikely to consider these grant programs a viable choice.
  • Conditionally repayable contributions – These grant programs require some form of repayment, however they also offer business owners some degree of protection. Programs include conditions on what type and how much funding is to be repaid. Typically, repayment terms are linked to a company’s performance and profitability.
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