Understanding Grants: Definition, Types & How They Work

What Is a Grant?

In its broadest sense, a grant is money given to a person, business, government or other organization that is designated for a specific purpose which does not need to be repaid. This contrasts with a donation, which is money given for general use without any stipulation as to what it must be used for. For example, a sum of money given to a scientist to create a project for the study of breast cancer would be considered a grant--the scientist is receiving funding, but it must be used create a specific project. Essentially any person or organization can be a grant giver, or a grant recipient. Often one must pitch an idea in a presentation or fill out an application in order to secure a grant.

Government Grants

The U.S. federal government is one the largest grant giving institutions in the world. Usually securing federal grant money requires demonstrating expertise in a certain area and a plan of action in an application for a specific grant. The government hosts a large list of available grants for those wishing to pursue various activities which lie in the public interest. Grants often involve research and development which the government may not be able to conduct easily itself. On important issues like energy and the environment, the government may sponsor grants for the private sector as well as carry on their own research. Incentivizing the private sector to work on issues in the public interest is a way the government can achieve its goals at a minimum cost. Creating an in house program for all the projects grants pay for would increase the size of government and almost certainly be more costly, since the private sector is already highly specialized and streamlined for efficiency.

Non-government Grants

Apart from the world's governments, many other institutions, such as corporations and interest groups give grants for projects in line with their core values. Unlike government grants, which are made for projects that are in some sense, related to public interest, private grants can be made for things that concerns only the institution making them. For example, an animal rights group might give a grant to a scientist to conduct research attempting to prove that animals have feelings. Grants need not always be applied for--groups with excess funds might seek out places to give grant money, and conduct any due diligence themselves. College scholarships are one form of grant which need not always be applied for directly; educational institutions often offer tuition grants, or scholarships, in order to draw in promising students or athletes.