There are times when loans outweigh the benefits of grants. It all comes down to what you need the 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:
|Source||Government & Foundations (NPO)||Banks, Crown Corporations, Government|
|Range||Typically: Up to $100K|
Specialized: Up to $3MM
Specialized: Up to $10MM
Established +1 years
|Ability to repay|
Foreign Market Expansion
Research & Development
|Equipment / Capital Costs|
We’re all about grants here; we can’t compare grants and loans without highlighting the advantages of grants:
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.
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.