If you are reading this article, then chances are at some stage you have wondered ‘what is a grant?’
Whether you’re new to government grants, or keen to expand your knowledge in business grants and government funding, you’re in the right place to find the answers.
As you read on we’ll cover off what grants are, discuss some of the different types, and explain some of the key terminology you should understand before you apply for a grant.
The world of grants and government funding can be daunting if you’re not familiar with how it works, so we’ve written this article to provide you with a good base of knowledge.
In this article we explore:
What are government grants?
A government grant is funding awarded to an applicant (this may include organisations such as small businesses, companies of all sizes, or not-for-profit organisations) for the implementation of specific projects.
Projects that receive grants usually provide specific outcomes that align to a priority or set of priorities at the local, state or national government level.
Governments award grant funding for many reasons including: stimulating economic growth, supporting innovation, building and developing infrastructure, or enriching communities.
Grants vary in size and are awarded at all levels of government; federal, state, and local. At any one time in Australia, there can be hundreds of grants open to applications, and billions of dollars in funding up for grabs.
But grants aren’t just awarded on a whim. They are awarded only to eligible applicants who can present a strong business case that outlines exactly why they need funding, and what the funding will be used for.
Is a grant free money?
No, a grant should never be viewed as free money. You can apply for a grant for free, but in order to be awarded a grant, your organisation will need to invest significant time, resources, and money into your grant application and project.
Unlike a loan, income from a grant is not repayable. But income from grants is taxable, so you need to account for that when you submit a grant application.
To be awarded a grant, your organisation will need to follow a set process. This usually involves meeting a very specific set of eligibility criteria, entering a compelling business case into a competitive process, and clearly answering a set of assessment criteria. The application process is designed to ensure you can demonstrate why your project requires funding, and it also details the activities you plan to use the funding for, should you be awarded a grant.
Grants are not discretionary income, so any funds awarded will only be for use on specific activities related to your grant project.
So, while you can apply for free, there are always costs associated with getting a grant—from planning and administering your project, to hiring a grant writer and meeting the aforementioned additional tax obligation.
Some grants will also require you to demonstrate your own funding co-contributions or will only provide funding up to a certain percentage of your total project cost.
How do government grants work?
Government grants are designed to help organisations achieve specific outcomes that align to government-led economic or social priorities.
To win a grant, an organisation must apply, and outshine other applicants. The application process is always competitive because a grant program’s total funding allocation will be capped. This means many organisations may apply, but only some will be awarded a grant.
Applicants need to meet specific eligibility criteria to win funding (eligibility criteria could include being a certain type of organisation, e.g., a manufacturer, a sports club, or a tech company), and clearly address a set of assessment criteria in their application responses.
At their core, grants are about supporting initiatives that help to build and maintain a prosperous nation. Grants can be awarded to stimulate innovation in manufacturing, develop new products, revitalise struggling communities, or support cutting edge research in science, technology, defence, space, and other technical sectors.
Grants are usually awarded to projects that:
- Create jobs
- Build or improve infrastructure
- Provide further training or upskilling opportunities to employees
- Help to reduce waste or energy usage
- Develop Australian imports and exports
- Accelerate business growth
- Enable the purchase of new equipment
- Upgrade, restore or fit out buildings
Governments also award grants to aid communities in recovery after a disaster, or to provide support for specific economic sectors in times of crisis.
For example, in response to the COVID-19 pandemic, the Australian State and Federal Governments launched grant programs to support the reactivation of various industry sectors after the pandemic forced many businesses to choose between closing their doors, or radically changing their daily operations in order to survive.
Co-contributions and in-kind contributions
Grants often require the applicant to display either co-contributions or in-kind contributions to receive funding.
Co-contributions are monetary contributions made by the applicant. This might come from the organisation’s own funds, a loan, equity investors, or another source of funding separate to the grant. For example, a government grant might fund only up to 50% of the total expenditure of a project, with the other 50% to be funded by the applicant.
In-kind contributions are goods and services; they are non-monetary contributions. These could include labour, donated items, or essential services required to facilitate the grant project.
How is grant funding is delivered?
Grant funding is always delivered directly to the applicant in the form of cash deposited into a bank account sums in response to the applicant meeting a project milestone. All grant projects have to stipulate details of how the project will achieve specific outcomes that align to the funding body’s priority areas. Applicants will need to submit reports that detail how funding has been used after it is awarded in the agreed manner as set out in a grant agreement between the applicant and the granting body.
The four main different types of government grants
Grants vary greatly in size, complexity, and competitiveness. Let’s look at some of the most common types of government grants in Australia.
(1/4) Federal grants
Federal grants are awarded by the Australian Government to organisations across the nation. Federal grants are usually large, with a complex and competitive application process. They are designed to support priorities set by the Australian Government, or boost Australia’s standing in the global economy.
(2/4) State grants
Each of Australia’s state governments also issue their own grants. State grants support state-level priorities and offer metropolitan and regional organisations the chance to invest in projects that require building of new infrastructure, development of new products, creation of jobs, delivery of events, and more.
(3/4) Community grants
Grants are also awarded by local shire councils to community governing bodies for social and community enrichment, or to support or sponsor local organisations in need of funding.
(4/4) Corporate grants
Corporate grants are provided by large corporations to support projects and initiatives that align with their corporate social responsibility (CSR) goals or business interests. These grants often focus on innovation, sustainability, community development, education, and health. Corporate grants can provide significant funding and resources, making them a valuable option for organisations looking to collaborate with industry leaders.
What is a grant application?
Every grant requires an application. This is also known as a grant proposal or grant submission. Like any business case, a grant application is written for a specific audience and is intended to achieve a specific outcome.
Grant applications must convince the grant assessors (who review applications on behalf of the grantor—the funding body) that the grantee (the applicant seeking funding) has a strong case for investment.
What makes a good grant application?
Grant assessors will check many applications during the review process, so to win, your grant application needs to stand out from the crowd.
Your grant application should present a compelling business case that convinces the reader that your organisation needs funding, is eligible, and is capable of using the funds in the desired way—to promote a valuable cause.
A good grant application must be clearly written and answer all the assessment questions in full, exactly as they are asked. Always pay attention to the details in the grant guidelines, as omitting a vital piece of information or specific detail could lead to your application missing out on funding.
A strong grant application will clearly document your plans and a timeline for delivery of your project, a budget, and outline the resources that you need to bring the project to life. Nearly all grant applications require supporting documentation to be provided, including financial and staff records.
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What to do before applying for a grant
Before you apply for a grant, you must always read the grant guidelines thoroughly. Each grant comes with a unique set of eligibility criteria, and to be awarded funding, your organisation must meet all of them.
Funding is often only available to certain sectors of industry (e.g., manufacturing businesses), and may be provided for use on specific activities or types of projects only. These rules are critical, and you should familiarise yourself with them before you start preparing your application to ensure your organisation has a genuine chance of being awarded funding.
Whenever You’re Ready, Here Are 7 Ways We Can Help You
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