Business and Personal Finance: Understanding Grant Funding
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Business and Personal Finance: Understanding Grant Funding

Understanding grant funding for business and personal finance.
   By the simplest definition by the American Heritage Dictionary, a grant is “a giving of funds for a specific purpose.”  That specific purpose not only means your purpose, but more importantly the grantor’s purpose.  Basically, a grant is financial assistance given to an organization, business, or individual to carry out approved activities to further the grantor’s mission, goals, and/or objectives.  

Grants vs. Loans

     A grant and a loan both offer needed financial assistance; however, a loan requires repayment whereas a grant is a “gift” of money that doesn’t need to be paid back.  A loan is given based on the applicant’s credit history; the applicant’s repayment ability; and the intended use of the funds. 

     Typically, a bank or lender doesn’t care as much about the last part of this equation if you can prove the first two because the lender is out to make interest on the money they loan you.  A grant, on the other hand, is given to further the grantor’s mission with no repayment required.  It is like an investment for the grantor because they care more about the “why” of the grant and what the outcomes and benefits will be because of the grant.  Yes, most grantors will still look at your financial viability, but it is secondary to the purpose of the funds. 

     A grant typically doesn’t have to be paid back (hence, the idea of “free money”); however, if you receive a grant you have to do something for that money.  There has to be a specific idea and a specific outcome for these funds.  And, if you don’t do what you outlined in your proposal to the grantor, there is a good chance that you will have to return the grant money. 

Grants vs. Contracts 

     When applying for a contract, which typically comes through an RFP (Request for Proposals), you will be applying through a government agency and not a foundation.  There is usually only one contract award and applicants compete against each other through a bid process, with the award being given to the best proposal and/or lowest bid based on scope of the work that will be performed.  For grants, applicants may be competing against other applicants for the limited funds available, but usually more than one grant gets awarded and each proposed project stands on its own without beings evaluated in comparison with the other proposed projects.  

Foundation Grants vs. Government Grants

     Government grants are usually much larger in size, from several thousands to millions of dollars.  Foundation grants are smaller amounts, hundreds to upwards to several thousands of dollars.  Also, most foundation grants do not require matching funds while many government programs require anywhere from 25% to 100% in matching funds.  Matching funds are the applicant’s contribution to the project.  It is the cash or in-kind funds that match the amount you are asking for in the grant (if you ask for a $100,000 grant, then you may need anywhere from $25,000 to $100,000 in matching funds committed to your project or program). 

     Government grant proposals are also more complex and take a lot more time to apply.  Not only are there numerous government forms and assurances that you will need to complete, it is not unusual to have a proposal narrative of twenty pages or more.  Foundation grants are more basic and don’t require as much information, maybe half as much as a government proposal.  Then, after a grant award is made, most government grants require tracking, further follow up, and reporting while foundations may simply want a one-page report at the completion of the project (with others not wanting anything at all).  Government agencies may require reports annually, bi-annually, quarterly, or even monthly.  They want to ensure the work is getting completed as outlined in the original proposal and it is complying with all the grant regulations.  They may even want you to report on the outcome of your project.  So, by no means is the money really “free,” especially with government grants.  There will be plenty of work to do, even after you have completed your project!  You still have to trade value for value – usually doing something for a higher purpose or for the greater good.  This fact is not something you will ever get around in the world of grants.  

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