Grants

A grant is money provided to a business with no obligation to pay it back. Grants are often associated with academic research or not-for-profit organisations, but some are also available for profit making businesses. However, the amount of money available is frequently fairly small given the nature of the arrangement.

The details

Obtaining a grant involves submitting an application to a grant provider. Once received, the provider reviews your application against their eligibility rules and often also against other potential recipients. When a provider has satisfied themselves that a business is worthy of receiving support, a grant is awarded to the business. If an application is successful the following steps can be as simple as cashing a cheque.

Grant providers usually look for businesses that can fulfil a particular social or ethical need. This could be the creation of new jobs or ideas, or that the individuals applying to the fund are themselves in a social group deemed to qualify for particular support.

Grants are often awarded in rounds. A provider will publicise a deadline, by which time all those interested in accessing the fund must have submitted their application. Once the deadline has passed, grant money is awarded based on the quality of an application compared with all other applications that have been submitted and the total funding available. Needless to say there are almost always many more applications submitted than there is money awarded.

Further complication can arise if grant money is released according to the achievement of 'stage gates'. This is where a business must reach certain thresholds or complete set milestones with one part of the grant before they are entitled to receive the next part. Larger grants are more likely to be operated in this way than smaller ones.

Who provides grants?

Grants are usually provided by the public sector and charities, although the latter are far more targeted in the organisations they support. Public sector grants are often delivered through a local authority’s business support departments but the money itself originates from central government or a European Union initiative.

Who are grants suitable for?

Grants can be found for businesses of any type although predominantly they are targeted at smaller businesses, younger businesses, and businesses with a clear social purpose. Businesses that fit into these categories benefit from being well aligned with the aims of more grant provider. Not-for-profit businesses / social enterprises can access grants too.

Advantages

• Grants are as close as it gets to funding your business for free; there is no need to pay them back.
• Your business may be awarded business advice alongside the cash support – this may be as or more useful than the money itself.
• Finance is often provided to businesses that other institutions would be unwilling to fund, meaning grants can be useful for getting your business off the ground.

Disadvantages

• Grants often have very stringent application criteria, thus obtaining a grant suitable for your business may be both time-consuming and difficult.
• Grants are highly competitive so the likelihood of obtaining one for your business may be low.
• Grant providers will usually want to know what you have done with their money, putting and additional reporting burden on your business.