Advantages & Disadvantages of Government Grants

by Andra Picincu - Updated October 15, 2018
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Lack of funding is a common problem for startups and small businesses. Approximately 79 percent of new companies fail because they're starting out with too little money. Furthermore, about 77 percent of small business owners rely on personal savings in the first few months. If you're planning to start a business or expand an existing one, consider using government grants. These are nonrepayable funds given to individuals, companies, charities, educational institutions and more.

What Is a Government Grant?

As an entrepreneur, you can reap the benefits of government grants and grow your business. These funds are awarded to organizations, artists, students and just about anyone who has an interesting idea or project that serves the greater good. Unlike loans, they are not expected to be repaid and don't include technical or financial assistance. For example, SEngine Precision Medicine, a startup involved in cancer research, got a $3.1 million grant from the National Institutes of Health.

Think of government grants as free money for your business. As long as you have a plan and a clear purpose, it may be worth applying for one. Just beware that eligibility requirements are quite strict.

Make sure you understand the advantages and disadvantages of social grants. Seeking them out, submitting your application and following up isn't easy. It can take months to receive the money you need.

Benefits of Government Grants

Government grants are widely available. All you need to do is check out Grants.gov, SBIR.gov and other similar websites. Even the USDA awards grants to businesses that use renewable energy systems. No matter your industry, you can find grants that meet your needs. Qualifying for one is the hard part.

One of the primary benefits of government grants is that you don't have to pay anything back. It's free money for your business. This can take some pressure off your shoulders so you can focus on other aspects, such as improving your products. Many times, government agencies are willing to take a risk that an investor or a bank wouldn't, especially when your business is just getting off the ground.

Additionally, funding is available in a wide range of categories, from health and wellness to science, commerce and education. You can use this money to expand your business and generate more revenue. Furthermore, there is no limit to the number of grants for which you can apply.

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Before sending your application, take the time to learn about government grants advantages and disadvantages. Check the eligibility requirements, create a detailed business plan and come up with a grant proposal. You're competing again thousands of other businesses, so make sure your project is grant-worthy and has a significant impact on the community.

Are There Any Drawbacks?

The most challenging aspect of a grant application is crafting the proposal. No matter how innovative your project is, it's worth nothing without a convincing proposal and a solid plan. Government agencies usually have very strict criteria. Therefore, the completion of a successful proposal takes a lot of research and know-how.

Another drawback is that government grants often come with strings attached. Even if you qualify for one, you cannot use the money however you want. It's imperative that you stick to the initial plan and comply with the rules. Plus, you need to track your progress and submit regular reports to the agency that gave you the grant. If you break the rules, you may be asked to repay the money.

Beware that most government grants are short term. When you run out of money, you have to find new funding sources. That's why it's important to use the money wisely and make the most out of your grant.

At the end of the day, the benefits of government grants outweigh the drawbacks. If you’re willing to invest the time and effort needed to secure funding, go for it. Just make sure you're prepared to be rejected more than once. Keep trying until you find a grant that suits your specific project and aligns with your goals.

Resources

About the Author

Andra Picincu is a digital marketing consultant with over nine years of experience. She works closely with small businesses and large organizations alike to help them grow and increase brand awareness.

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