Is grant funding right for your business?

12 Ways

Jan 28

Is grant money really free money? There’s lots to consider before including it in your financing strategy

Grant funding, free money, or is it?

It is true that it doesn’t dilute your equity like other forms of financing but there is plenty to consider before you include it in your financing strategy. As with anything there are pros and cons to grant funding and you need be aware of them and consider them in the wider context of your business.

The Upside

On the positive side, and the one that everyone loves, a grant won’t cause you to have to give away any equity to your business. In start up and scale up world where every investor wants a share of your business then that can be very refreshing and attractive.

A grant can be used to focus on very early development of an idea and help you to get an idea off the ground when other investors wouldn’t invest as it is just too early days and unproven.

Grant funding can enable you to work with research partners that you simply wouldn’t be able to afford without this injection of cash. Having an established and funded project will encourage them to become involved.

The focus and resources that a grant can bring to an organisation often speeds up the time to market for a solution.

Other investors love to see and are encouraged that you have achieved grant funding. They know that it isn’t easy to achieve and when your company does it validates your work, approach or innovation. Investors like that someone else has taken a thorough look at your plans and determined them worthy of investment.

The Downside

All sounds good, what’s not to like about grants? Well there are somethings to be aware of.

When you are awarded a grant you are very rarely handed the full value of the grant on day one of the project. Often they are paid quarterly in arrears, once you have demonstrated you have achieved your deliverables from the quarter. It can take up to month four from the start of your project to receive your first payment. This can be hard on your cashflow as you have to fund the first months of the project.

To demonstrate that you have achieved those deliverables there tends to be a reporting requirement built into the terms and conditions. If admin isn’t your thing and you don’t like completing reports then you need to find someone to support you in this as it will be key to the successful payment of your grant.

A big thing to be aware of is that often you are not allowed to commercialise your work whilst receiving the grant. Meaning you can’t sell what you are developing with the grant during the period that you are receiving the grant. For some businesses this is easier to manage than others.

Grant funding tends to be for part of a projects total cost so you will likely have to fund a percentage of the project yourself and be able to demonstrate to the body awarding the grant that you are able to fund your element of the total project cost.

Summary

A grant can be a great way of bringing capital into a business but there are real considerations as to how you will meet your financial obligations during the project which need to be built into your planning.

If you would like to understand more about grants that are available and how to apply do get in touch, we would be very happy to explain more to you and answer any questions that you may have. Email hannah@whiteraft.co.uk.