What is a Grant?
A grant is an award, usually financial, given by one entity (typically a company, foundation, or government) to an individual or a company to facilitate a goal or incentivize performance. Grants are essentially gifts that do not have to be paid back, under most conditions. These can include education loans, research money, and stock options. Some grants have waiting periods—called lock-up or vesting periods—before the grantee can take full ownership of the financial reward. (Chen, J., 2021)
EU funding programmes
The EU has several different funding programmes that you may be able to apply for, depending on the nature of your business or project.
There are two different types:
- direct funding
- indirect funding
- The allocation of direct funding capital is managed by the European Institutions. There are two types of funding available: grants and contracts. You can apply for grants and contracts managed by the European Commission on the Funding and Tenders portal.
- Grants are given to specific projects that relate to EU policies, usually following a public announcement known as a call for proposals.
Who is eligible?
- You may apply for a grant if you run a business or a related organisation (business associations, business support providers, consultants, etc.) that runs projects that further the interests of the EU, or if you contribute to the implementation of an EU programme or policy.
- Contracts are issued by EU institutions to buy services, goods or works that they need for their operations – such as studies, training, conference organisation or IT equipment. (Practical guide to doing business in Europe, n.d.)
Private Funding/Acquisition of private investors
- Private equity is an alternative investment class and consists of capital that is not listed on a public exchange. Private equity is composed of funds and investors that directly invest in private companies, or that engage in buyouts of public companies, resulting in the delisting of public equity.
- Institutional and retail investors provide the capital for private equity, and the capital can be utilized to fund new technology, make acquisitions, expand working capital, and bolster and solidify a balance sheet.
Types of private equity
Leveraged buyouts– Most private equity investment takes the form of a leveraged buyout, i.e. buying out a company entirely with the intention of improving its value and reselling it for a profit or conducting an IPO.
Distressed funding– Sometimes referred to as “vulture financing”, distressed funding refers to investment in troubled companies that have underperforming assets or business units. After making the necessary changes, the private equity firm will sell the business for a profit.
Venture capital funding– Venture capital is a type of private equity that is predominantly focused on early-stage investments with excellent financial potential.
Growth capital– Growth capital is usually focused on stable organisations that are undergoing a period of expansion, whether that’s developing new products or expanding into a new market.
How it works
- Raising funds– Private equity investors will raise capital to form a private equity fund. Once this money has been raised, the fund will be closed to new investors.
- Conducting research– Next, the private equity fund manager will identify and research a portfolio of private companies that the fund will invest in, hoping to generate a capital profit from the sale of the investment.
- Improving operations– This is the most important step in the process. The private equity firm will aim to improve efficiency, boost cash flow, reduce costs, and grow the business, taking a hands-on approach by advising on strategy and development, making introductions with potential customers, and acting as a general business partner.
- Selling the portfolio– The final step is for the private equity firm to realise the increased value of their stake in the business by selling it
- Credit is generally defined as an agreement between a lender and a borrower.
- Credit also refers to an individual’s or business’s creditworthiness or credit history.
- In accounting, a credit may either decrease assets or increase liabilities as well as decrease expenses or increase revenue.
- A loan is when money is given to another party in exchange for repayment of the loan principal amount plus interest.
- Loan terms are agreed to by each party before any money is advanced.
- A loan may be secured by collateral such as a mortgage or it may be unsecured such as a credit card.
- Revolving loans or lines can be spent, repaid, and spent again, while term loans are fixed-rate, fixed-payment loans.
(Business Term Loans: Best options 2021, 2021)
Chen, J., October, 7. 2021, “What is a Grant? Definition, Examples and how Grant options work”, Investopedia, https://www.investopedia.com/terms/g/grant.asp
“Business Term Loans: Best options 2021” January, 27. 2021, fundera, https://www.fundera.com/business-loans/business-term-loans
“Practical guide to doing business in Europe”, n.d., Europa, https://europa.eu/youreurope/business/index_en.htm