GRANTS AND SUBSIDIES

Although grant funding might not be a reliable source of funding for the long-term and for many for-profit companies, it still can be a very valuable choice of funding in the early stages of a company. Grant funding usually requires a high degree of mission embeddedness and the pursuit of specific purposes, and might therefore especially speak to steward-owned companies. These funding opportunities can provide essential early-stage capital or can be used to secure seed, bridge, or subsequent funding through government grants and subsidies.

While grants are often issued to and used by non-profit organizations, many governments offer financial support programs tailored to different types of businesses or projects (e.g., sustainability, digitization), funding purposes (e.g., research and development, job creation), or company phases (e.g., start-ups). These grants are typically non-repayable funds provided by governments, foundations, or trusts under strict eligibility criteria and usage restrictions. However, for-profit companies may also access forgivable loans, where repayment is waived under certain conditions. In some cases, hybrid models blending grants/donations, and loans are also available. One example is the so-called “Wandelspende” (convertible donation), which combines elements of a loan and a donation: the loan is partially or fully converted into a donation once clearly defined impact goals are met. But grants that convert into equity are also an option.

However, if a company is already utilizing debt financing or mezzanine instruments, securing grants or subsidies may become more challenging. High debt levels or a lack of familiarity with mezzanine structures can limit access to government funding. Therefore, it’s crucial to carefully assess how different financing sources interact before pursuing grant funding.

If you want to learn more about grant funding, we recommend this resource: