Types+of+grants

Grants, unlike loans, usually have no requirement for the funds to be paid back.

Matching Grants require funding from another source or sources, in addition to funding from the granting organization. The match may be set at a percentage of the grant component – not necessarily 50%. The match funding may be in cash or a part may be “in-kind” in the form of services, facilities, or equipment. Having the grant recipient responsible for finding match funds is regarded as an incentive to assure performance. However, in the case of matching grant programs directed at SMEs, it may be difficult for an SME to raise the money. Therefore, setting the appropriate match percentage is important.

 Reimbursable (repayable) Grants are unusual but are sometimes used in an attempt to recycle funds where grant funds are limited. Repayment by recipient SMEs which, for example, have increased sales as a result of the grant will be encouraged to make voluntary repayments to help other firms (similar to a “soft loan”).

Grants for technology development and commercialization
Grant financing is an integral component of the spectrum of finance instruments to support technology development and commercialization. Grant programs can work in cooperation with financing provided by angel investors, seed capital funds, venture capital funds, public-private partnerships, and other forms of private equity. Large firms generally have sufficient access to capital to meet their R&D and commercialization financing needs, but small and medium enterprises typically do not.

Grants may operation on two levels (i) support for specific projects, and (ii) support for innovation strategy (including such components as developing an innovation eco-system, infrastructure or networks). Grants are frequently provided in phases based on certain milestones being achieved. Grants are used to promote diverse activities, such as:


 * 1) Stimulate firms to carry out R&D either in particular ways or in particular areas of need by targeting these in the grant eligibility requirements.
 * 2) Stimulate collaborative R&D and new product development between universities and/or research institutes and industry.
 * 3) Create R&D and product development consortia.
 * 4) Bridge gaps between short term funding and long term funding.
 * 5) Conduct proof of concept and prototyping in order to attract long term finance.
 * 6) Reduce risk for later stage finance by funding the high risk stage of innovation (also called the “front end of innovation”).
 * 7) Develop linkages between firms and along supply chains.
 * 8) Increase a firm’s ability to access private sector financing.
 * 9) Obtain training in needed skills and technical and management assistance, and access know-how.
 * 10) Purchase advisory services such as mentoring, problem solving, and consulting.
 * 11) <span style="font-family: Arial,Helvetica,sans-serif;">Strengthen human resource development and institutional capacity.
 * 12) <span style="font-family: Arial,Helvetica,sans-serif;">Obtain market information (carry out market intelligence).
 * 13) <span style="font-family: Arial,Helvetica,sans-serif;">Package and promote a firm’s products or services.

<span style="font-family: Arial,Helvetica,sans-serif;"> Expectations for what a successful grant applicant is expected to achieve with grant funding must be developed and made clear. While grants are typically provided by the public sector, they may also be part of a private or public private technology development system (e.g. grants may be provided by public or public-private national innovation investment funds as pre-investment support).

<span style="font-family: Arial,Helvetica,sans-serif;"> Some questions for deciding whether to use a competitive grant program:


 * 1) <span style="font-family: Arial,Helvetica,sans-serif;">What is the need to be addressed or problem to be solved?
 * 2) <span style="font-family: Arial,Helvetica,sans-serif;">Is the grant designed to address a market failure? If so, for what products or services?
 * 3) <span style="font-family: Arial,Helvetica,sans-serif;">Would a grant program deal most effectively with the problem or should it be addressed by some other type of investment?
 * 4) <span style="font-family: Arial,Helvetica,sans-serif;">Would a grant program reduce or eliminate a situation that discourages private investment?
 * 5) <span style="font-family: Arial,Helvetica,sans-serif;">Do the benefits of a grant program justify the costs?
 * 6) <span style="font-family: Arial,Helvetica,sans-serif;">Would the proposed grant program have unintended and perhaps undesirable side-effects?
 * 7) <span style="font-family: Arial,Helvetica,sans-serif;">What is the best design of the grant scheme? Should it intervene on the demand side or on the supply side?
 * 8) <span style="font-family: Arial,Helvetica,sans-serif;">What criteria determine who is eligible to receive a grant?
 * 9) <span style="font-family: Arial,Helvetica,sans-serif;">For what activities and for what monetary amount should the grants be devised? Do all eligible parties have fair and equal access to the grants?
 * 10) <span style="font-family: Arial,Helvetica,sans-serif;">Is the capacity to implement the scheme sufficient?
 * 11) <span style="font-family: Arial,Helvetica,sans-serif;">Does the expected future use of grant schemes warrant relevant capacity building?
 * 12) <span style="font-family: Arial,Helvetica,sans-serif;">Are transparency and accountability sufficiently planned?