Sufficient funding is the lifeblood of any business, project or initiative. Grants are a critical funding option offered by US governments to support projects, initiatives, and services that align with their goals. What makes federal grants exceptional is they are non-returnable; this means you don’t have to return the money. US grants are of different types, each one offering funding for different sectors and purposes. However, there are 4 key types of grants that operate differently, with unique guidelines, eligibility, compliance and benefits.
From merit-based selection to predetermined allocation, these 4 grants serve as the base of government grant funding. Whether fostering innovation, addressing social challenges, or supporting existing programs, these grants streamline your project and ensure impactful results. Understanding these grants is important to choosing the right one, crafting an impactful proposal, and maximizing winning chances. In this blog, we will explore these 4 central grants in detail to help you choose the right grant funding option and achieve the best results.
Competitive Grant: Based on the Merits
What It Is:
Also known as discretionary grants, Competitive grants are awarded based on a merit-based selection process. This basically means you have to compete with other organizations sending applications for the same grant. The most important thing about competitive grants is that their result is not predetermined. Companies and organizations whose applications and proposals are best get the funding.
How It Works:
Competitive grants are offered by government agencies, private organizations, corporations, and non-profit organizations. The funding agency can have a single member or a team of people who read, evaluate and then select the winners of the grants.
You have to submit an application and proposal outlining the goals, objectives, budget allocation, long-term planning, community impact, value-aligned, etc., in a detailed manner. It’s important to ensure that you fit their profile and have all the resources, documents, and information to complete the application process. Make sure to understand what has been asked of you in the application and fill out the form accordingly.
The funding agency will compare different grants and offer funding to the ones that best align with their goals. If you get selected for funding, you will receive a specific amount based on your cause and budget.
Example of Competitive Grants:
Examples of Competitive grants include NGOs, scientific research, education, technology, music and art, and the environment. Suppose a non-profit is applying for a federal grant to fund innovative educational programs in underprivileged communities. After an in-depth analysis, the funding agency will offer funding to only a few NGOs for their initiatives.
Formula Grant: Based on Predetermined Award
What It Is:
Unlike competitive grants, formula grants are non-competitive, which means every eligible organization or individual can get the funding. The formula grants are predetermined based on factors such as population size, poverty rates, and other demographics. This means no competition between organizations is involved in formula grants. The formula is the way or criteria on which funding is allocated to the recipients.
How It Works:
Formula grants are for states, local governments, and other organizations that are involved in social initiatives. The funding for this program is determined by a formula established by legislation, and all organizations follow this formula when selecting awardees.
The criteria are based on measurable factors such as population, income levels, the number of impacted people, crime and poverty rates, and the number of students in the district.
To apply, it’s essential for you to meet the minimum requirements outlined in the application process. If you meet the eligibility criteria, you can move forward with filling out your application. It’s important to submit plans and methods for using the funds while adhering to the grant’s guidelines.
The choice of projects to receive funding depends on the local level and the importance of the project. However, how much each receiver will get depends on the receiver’s qualifications, project goals and social impact.
Examples of Formula Grant:
The federal government supports state and local programs, such as Medicaid health insurance, public education, water and energy projects, and transportation infrastructure. For example, Federal funds are provided to state governments for public transportation improvements based on increasing population size.
Continuation Grants: Renewal of an Existing Grant
What It Is:
As the name reflects, Continuation grants are additional funding provided to extend or renew an ongoing project or program. In this, the grantor evaluates the project’s progress and impact before deciding to renew the grant. Continuation grants are non-competitive and ensure sustained efforts for ongoing initiatives. Even new applicants can apply for this grant, but priority will be given to existing grantees.
How it Works:
Continuation grants are for government-funded programs, multi-year initiatives and established relationships for supporting their existing projects. If you’re a new applicant and want to try this grant, it’s crucial to merge or make a partnership with an entity already funded by continuation grants.
If you’ve finished the first year of a three-year funded project, you can apply for more funding for the next year. To do that, you must submit a report explaining your progress, achievements, challenges, and how you performed with past funding.
Funding decisions are based on available money, how well you performed in the earlier phase, and how your project benefits government goals. If your results meet expectations, you will get more funds for the next stages. But if you fail to meet objectives or complete required tasks, you might lose the chance to get further funding.
Examples of Continuation Grants:
Continuation awards often support non-construction projects like substance abuse programs, agricultural initiatives, and health and human services. For example, a health department receives additional funds to maintain a program addressing childhood obesity.
Pass-Through Grants: Issued by a Federal Agency
What It Is:
Pass-through grants are offered by federal agencies to state governments or institutions. The state government then distributes the grant funding to sub-recipients, including local governments, state institutions, other state governments and non-profit agencies. Pass-through grants let agencies fund groups that can’t get direct grants. The award is granted as per the adherence to the eligibility terms.
How it works:
The grantor provides funding to a primary recipient, the state government. The terms and audit regulations are established by the state government, which is the prime recipient. This means the state government has full control and authority in providing these grants.
The primary recipient then manages the funds and oversees sub-recipients. States can distribute federal grant funds competitively or non-competitively, depending on rules, allowing them flexibility and control over allocation. For example, for a housing program, the funders follow a non-competitive formula.
To get funding, you have to apply to the main recipient by following their rules. Check your state’s grants office for pass-through grants and apply accordingly. The states have the power to determine how much grant amount you will receive based on your project scope, impact, and contribution.
Examples of Pass-Through Grants:
These grants fuel sectors like housing, education, infrastructure, water and energy, public services and health care. For example, Federal funds are given to a state government for disaster relief, which the state distributes to affected local governments.
Conclusion
Federal grants are the best way to fund your business or social initiatives without the stress of repayment. Although there are numerous grants available for different purposes, there are 4 main categories. Competitive, formula, continuation and pass-through grants are the 4 pillars, which consist of numerous other grants. Competitive grants are not predetermined, while formula grants are pre-determined. Continuation grants are given in continuation of the previous grants, while pass-through grants are passed down from federal to state to local governments. So, consider your requirements and eligibility, and choose the correct option.
