Loans & Grants
A vital step for startups
Why should I know about this?
For startups and emerging ventures, securing funding is often a critical challenge. Understanding the differences between loans and grants can empower entrepreneurs to make informed financial decisions that drive their business forward.
About Loans
Loans provide necessary capital that must be repaid with interest, making them suitable for ventures looking for immediate funds to scale operations or invest in growth.
About Grants
Grants offer financial assistance that doesn't require repayment, making them an invaluable resource for startups focused on innovation, research, or community impact.
How do Loans and Grants Differ?
Loans
A payment of money that is expected to be returned before a certain date, usually with interest.
Affected by interest rates; can require collateral.
Provided by private lenders (friends, family, angel investors) or banks.
Can be applied on an individual basis.
Often Requires alignment with pro-social goals.
Grants
A payment of money awarded for a
specific purpose, often without
the expectation of repayment.
No financial burden or risk.
Provided by pro-social focused institutions, such as NGOs or government entities.
Typically awarded to institutions
rather than individuals.
May require a corporate structure to be set.
Advantages
Loans
Higher chance of securing funding.
Higher potential value of funding.
Grants
Good publicity for startup.
Helps boost network for
companies with similar goals.
Disadvantages
Loans
At risk of losing collateral and
credit rating if done with bank.
Must pay interest.
Repayment structure may limit liquidity.
Grants
Takes longer to get funding.
More competitive.
Application process is strenuous
Debt financing vs Equity financing
Debt
The accumulation of debt in exchange for funding.
Can be done as an individual.
Must be paid back. (with interest)
No valuation of company necessary.
