Grants for Small Business Guidebook
What’s the difference between a grant and a loan?

There are times when loans outweigh the benefits of grants. It all comes down to what you need the funding for.


  • Loans are borrowed from a person or financial institution and must be repaid with interest. 
  • Grants do not have to be repaid and can be considered free money. 
  • There are pros and cons to both, and it comes down to what your business needs funding for.

So we know what grants are. But what about loans? A loan is money you borrow from a person or financial institution that you must pay back after an agreed-upon time frame. More often than not, loans also have interest charges which you are compelled to pay. 

Based on that, it sounds like grants are a no-brainer, but there are times when loans outweigh the benefits of grants. It all comes down to what you need the funding for. A common misconception is that capital assets such as equipment, vehicles, land, or operational costs including rent, furniture, internet, and software can all get covered by grants. The reality is that it’s very rare for grants to cover these types of expenses – but loans do. With loans, you have the flexibility of using it on whatever your business needs, but you have to pay it back, with interest.

To summarize the key differences between a grant and a loan, we’ve put together a lookup chart:

SourceGovernment & Foundations (NPO)Banks, Crown Corporations, Government
RangeTypically: Up to $100K
Specialized: Up to $3MM
Typically: <$500K
Specialized: Up to $10MM
EligibilityGrantable Activities
Established +1 years
Ability to repay
Foreign Market Expansion
Research & Development
Equipment / Capital Costs
Bridge financing
Operation Costs

We’re all about grants here; we can’t compare grants and loans without highlighting the advantages of grants: 

  • You don’t have to repay the money you get from a grant – it’s essentially free money. 
  • There is less risk involved with a grant since it does not entail paybacks, interests, and collaterals. 
  • With a grant, you are able to grow your business with support from government programs. 
  • Winning a grant comes with benefits such as prestige, publicity, and networking opportunities. 

We hope we have been sufficiently able to clear the air concerning the differences between a grant and a loan. If you are looking to get financial aid for a project or to scale up your business, you may stand to gain a whole lot more from applying for a grant in Canada compared to loans. 

Chapter 3 – Who qualifies for small business grants in Canada?

The Government of Canada has grants available for individuals, small businesses, large corporations, and nonprofits. This rings true on the provincial and federal levels, giving Canadians a myriad of options in their search for grant funding. 

Calculate your potential grant funding

Curious about how much grant funding your company can get?