One of the key elements of every business is financing. However, only a few people are lucky to have monies readily available to start their businesses or even to expand.
The two most common means of getting the funds are through acquiring a loan or obtaining a grant.
In this article, GhanaWeb gives an explainer on the difference between a loan and grants below:
According to rocketlawyer.com, a loan refers to anything that is borrowed or lent. The term is mostly used to refer to an amount that is borrowed to be paid back with interest.
On the other hand, rocketlawyer.com defines grants as monies or funds given by a government for a purpose. Grants can also be said to be gifts since the receivers will not have to pay back i.e., they are non-repayable.
The main difference between a grant and a loan is repayment. Loans are to be paid back with interest whereas grants like gifts, do not require repayment.
Grants may be awarded by government departments, trusts, or corporations and given to individuals, businesses, educational institutions, or non-profit organizations.
Financial institutions such as banks, savings and loans companies, micro-credit companies offer loans to individuals and businesses.
Sometimes friends and family may also give loans to each other, however, depending on the agreement, the loans may be repaid with interest or otherwise. Ideally, loans from family and friends should be documented to prevent any misunderstandings that may arise from the non-payment of the loan.
Obtaining grants may be quite difficult for individuals because when a grant opportunity arises, they are very competitive and difficult to obtain. When considering grants vs. loans, businesses typically rely on loans to obtain the funds they need.
However, the advantage is that grants do not require any repayment so beneficiaries are not under pressure to pay within a stipulated time.