Advantages & Disadvantages of Grants

If your business needs a boost of capital to implement a special program or buy equipment, a grant may help you to meet those needs. The U.S. government offers a wide variety of grants, as do many private foundations. Although grants may seem to be free money, the reality is that you will invest many hours of your time administering the grant--assuming you get it.

Grants provide money to qualifying businesses to fund specific goals. If you are trying to fund a staff position that you otherwise don't have the budget for or need money for a specific project, obtaining a grant can be the answer. Businesses that have the time to find and write grants often enjoy programs and extra positions that companies who don't bother with grants don't have. For example, a non-profit educational agency might use grants to fund a campus beautification project, a community coordinator position, or on books for a reading improvement program.

Unlike a loan, grant money does not have to be repaid. For this reason, companies may look at grants as windfalls. Some companies may hire full-time grant writers so that they have access to grant money on an ongoing basis. If a business does not use the grant money in the manner specified under the terms of the grant, however, the grant can be revoked and the business will not receive the grant money the following year.

Obtaining a grant is not easy. First your business must locate a grant. This can be difficult as many grants have geographic constraints, may be limited to non-profit organisations, or have other requirements you cannot meet. Once an appropriate grant is found, your business must apply for it. Typically, there is considerable competition for grants, so even though you may spend 100 hours or more working on the grant, there is no guarantee that your business will receive it. Many granters require businesses to demonstrate community support for the project and fulfil many other requirements before the grant application will be accepted. This can be quite time-consuming.

After your business receives a grant, you will be required to submit the documentation that you agreed to when you filed the grant application. As taxpayer money is used to fund small business grants, they "require very stringent compliance and reporting measures to ensure the money is well spent," according the Small Business Administration. For example, if the grant is for a reading program for your tutoring business, you may be required to track the reading gains of each student using the program over a period of time. You'll need to submit your data to fulfil the requirements of the grant.