June 10th, 2015
Contrary to some popular misconceptions, government grants are not just “free money.” While it is true that grant money does not need to be repaid, common conditions applied to grants make them far from “free.” Some of these conditions are outlined below:
Dollar Matching
Dollar matching is one example of the gymnastics often involved with government grants. Grants of this nature require the applicant to meet the government’s investment dollar-for-dollar. For example, to be eligible for a $10,000 grant, an applicant might need to provide an equal amount of capital. In this way, the applicant demonstrates their commitment to the project at hand.
While it is true that the money matched by the government grant is indeed free, the investment of a substantial amount of business capital is not. Keep in mind that not all dollar-matching programs operate on a 1:1 basis. Generally, this is the standard ratio, but grants can require the applicant to provide a more one-sided share.
Invested Effort
To say that government grants are free money is to gravely overlook the necessary investment of time and energy on the part of the applicant. Almost all grants require some type of proposal to apply. As a result, the applicant must take the time to outline their objective and affirm eligibility for the grant in question. Invested time can vary widely depending on the type and size of a particular grant. For many businesses, employees, and even dedicated departments write grant proposals. The time invested by these employees in applying for these grants must therefore be taken into account. Wages are not free, so neither is any grant money. What if these employees’ efforts bear no fruit? Then that company is left to foot the bill and fold that cost into future grant proposals.
Even if you are self-employed, or the sole proprietor of a company, do not overlook the time investment required to write grant proposals. Any efforts could be applied elsewhere in your company and should be viewed as lost labour. Proposals are not free.
Restricted Use
Often, grant money cannot be used for whatever the winning bidder desires. In fact, grant money is often earmarked for a specific purpose. As such, grant funds can leave companies with their hands tied. Perhaps an approved project runs under-budget? Excess funds from that project cannot simply be shifted to another area of the company without following the correct procedures. Failing to adhere to the funding agreement can severely limit a company’s ability to acquire future grants.
As part of accepting funds from a program, companies must usually submit to periodic evaluations from the granting body. This means that inspectors can make unannounced visits to ensure that disbursed funds are being used for their agreed purpose. This means more hoops for a company to jump through if they do not want to see their funding pulled.
For these reasons, it is a mistake to view grants as free money. When pursued wisely, the benefits of grants often heavily outweigh the drawbacks. A prudent company, however, is careful to consider these areas and not find themselves caught in some of the many common misconceptions. For information and help for applying to any program, contact INAC Services today!