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Grants are always good, right? Well, there IS a downside!

Many start-ups and SMEs apply for grants to help them develop a business idea or grow and expand their products and services.

Applying for a grant imposes a useful discipline.  To be successful you need to comply with the grant guidelines and deliver products or services according to the schedule, budget and deliverables as specified in the contract.

Most applications require supporting documentation – usually a business or strategy plan, insurance, evidence of a track record, detailed financials, risk analyses and quotes to justify any proposed costs.

Large organisations often have in-house grant experts who know how to write successful applications.  But this is not the case with start-ups and small businesses.   So, what is the downside?

  • Time and skill – applying for grants involves time and work in putting together a cohesive application, collating all the supporting evidence, and providing relevant answers to all the questions. There is a level of skill involved in writing proposals that many start-ups under-estimate. So don’t get diverted from running your business by wasting time applying for grants for which you are not eligible and aren’t able to justify.  If you are not sure if you meet the criteria, contact the grant provider to find out.  Keep in mind, if you are successful you will probably have to submit milestone reports, audited financials and end of contract reports so the work load is ongoing.
  • Making it fit – ask yourself if the grant really fits your business strategy or are you trying to make it fit? If you need to make significant compromises to fit the grant guidelines, you may be setting yourself up for disaster by having to deliver products and services that are beyond your expertise and resources; employ staff you don’t really need or reach targets that you are not able to attain. The downside is that you may have to repay grant monies if you don’t meet your performance deliverables.
  • Don’t invent new services just to meet the grant guidelines. If you don’t need expensive imported equipment; a regional office and staff; new vehicles, items that you would not normally purchase etc. don’t include them.  Inventing a new service that you have no experience in delivering may jeopardise your credibility.  Remember that all your grant expenses have to be justified and stand up to scrutiny.
  • Specific criteria – some grants only fund particular types of activities e.g. a website, marketing plan, equipment, export. Ask yourself if this is a real benefit or priority for your business or is it just a “nice to have”?  Some grants specify the type of organisations, collaborators or specialists you can work with e.g. research organisations, NFPs, etc.  You need to ensure that any collaboration is workable and an appropriate match for your business.
  •  Financials – most start-ups are wildly optimistic in their budget estimates. The common error is to over-estimate the likely revenue or sales and drastically under-estimate the costs.  Mistakes like this can lead to insolvency and a default on the grant contract.  So ensure your financials are realistic as they will be checked.
  •  Grant dependency – if your business model is dependent on regular grants you are in a very vulnerable position. Many social enterprises have found this out at their cost.  Rather than continually applying for grants, it may be more worth-while to establish a more stable revenue model.

If successfully with your grant application you will need to provide evidence of how the funding was spent (audited accounts) and details of the deliverables, outcomes etc.  So fudging it isn’t an option!

There are often long delays in finding out whether your grant application was successful and this can leave you in limbo.  Use this time purposefully to ensure you are ready to go if the grant monies are received or have a back-up plan if you are not successful.

In summary, a grant isn’t simply a life-line to keep your general business ticking over.  Grant monies can only be used for the contracted activities so ensure these align with your business strategy.

Need help?  Contact INNOVIC on (03) 8060 3504

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