In praise of grants

The newer arrivals on the funding scene (such as loans, social impact bonds and crowdfunding) are getting a lot of attention. Novelty is always appealing and makes the more familiar ‘grant’ come across as a bit old fashioned and dull.

The Association of Charitable Foundations estimates that 10,000 charitable trusts and foundations in the UK distribute £2billion in grants annually. This equates to about 10% of all income into voluntary organisations annually. Add to this grants from the government and local authorities and grants still have a significant role to play in funding non-profits. They warrant our attention.

So perhaps it is time to remember the good things about grants as a source of funding.  From a funder’s point of view, they have the advantage of relatively low transaction costs – much cheaper than contracting a service. So here are my top five benefits from the recipient’s perspective:

1. You don’t have to pay them back – there will be a social return expected but you won’t need to worry about making a financial return as well.
2. They are valuable when needing to cover activity costs like research and development where it is difficult to generate enough income to cover costs.
3. You get the money upfront – it is trusted that you will do what you said you would with the money so there are no cashflow problems unlike Payment by Results models.
4. They give credibility and can act as leverage to more money – if you have a grant approved from e.g. Henry Smith or Heritage Lottery Fund then it gives confidence to others who are considering supporting you.
5. They represent a partnership – the funder’s involvement can bring added value such as access to a network of similar organisations or help with influencing policy.

And finally, fundraisers may disagree, but I find that the discipline of applying for a grant can help ensure that projects are well thought through. The external scrutiny can help hold you to account for the activities you deliver.


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