The term grant refers to any funding instrument that makes no financial claim on a business in return for providing the funds. Oftentimes the money can only be used in a way agreed prior to disbursement.

A grant refers to a type of funding that typically does not obligate the recipient to repay the funds. Nor does it make any financial claim on a business in return for providing the funds. This includes everything from grants offered by national and international organisations or foundations, as well as prizes and awards offered through competitions, along with donation-based crowdfunding campaigns. Grants are typically the most straightforward form of funding. The amounts that organisations grant to businesses vary widely from thousands to millions of dollars. The most common grants, however, tend to be on the smaller side, typically under RWF 47m ($50k). This makes them the most appropriate for early-stage startups and entrepreneurs, or more established entrepreneurs seeking capital to ease cash flow constraints.

Typically, organisations making the grant will put out a call for applications, inviting interested start-ups to pitch their ideas. Applicants will need to show how their business or idea is relevant to the grant. A judging panel selects finalists and the winner or winners are identified from the pool. While organisations that fund grants typically do not expect any sort of financial return (i.e. a stake in the business, or a promise of repayment), they will thoroughly check grantees to ensure the money is being used for the intended purpose — both when the grant has been disbursed and afterwards. Some organisations release grant payments in phases/stages to ensure the company is working towards its stated goals.

  1. ‘Free’ money in the sense that there is no equity or interest to pay

  2. Funders have little influence in day to day operations of business

  1. Little support besides funding – hard to grow networks or get targeted mentorship

  2. Long applications

  3. Post-funding reporting is sometimes extensive

  4. Grant makers can be inflexible in accommodating start-ups that need to pivot from one business strategy to another