Contract Funding Vs. Grant Funding

  • October 26, 2020

There are several ways for small businesses to obtain funding from the federal government. While grants are a relatively well-known source, there are also plenty of federal contract opportunities out there that can provide a source of income to small businesses in return for services. While both opportunities have their merits, it is important to understand the key differences between these two types of federal funding.

Grant Funding

Grants from federal or foundation sources are awards given to companies to complete large scale projects. Often these projects carry a risk, that is, the end goal is something the small business intends to accomplish and has demonstrable resources for doing so, but there is no guarantee that the project will be 100% successful. This is the case with the well known Small Business Innovation Research (SBIR) grants offered by 11 federal agencies. This is also the case with many humanitarian, economic development, or community improvement projects that are awarded through foundation funding.

Grants usually offer a longer submission window, have a longer project duration (6 months to 5 years depending on the agency and individual solicitation), and focus on innovation rather than simply providing a service in exchange for funds. For the most part, Grants also tend to have more reporting and evaluation requirements and larger award amounts when compared to contracts. Those interested in learning more about federal grant opportunities are encouraged to check out

Federal Contract Funding

Contracts differ from grants in that they tend to focus on a product or service rather than an innovation. Contracts tend to have short application windows with about 30 days being the standard and some expiring in as little as 7 days after the Funding Opportunity Announcement (FOA) is published. Contracts either pay a set amount for or accept the lowest bid offered for an explicit amount of products or specific services during a given time frame. Contracts are a great opportunity for businesses to earn income offering products or services they already provide without the need to focus on research and development or innovation exclusively. For a complete list of available contracts, visit Beta Sam.

Federal grants and federal contracts are both great opportunities to obtain funding. Which of the two, is the best choice for each small business depends upon the individual focus and needs of the business. Those with innovative research would likely benefit more from a grant, while those providing a service or product are likely best suited for a contract. Are you ready for your grant?

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We assist our clients in locating, applying for, and evaluating the outcomes of non-dilutive grant funding. We believe non-dilutive funding is a crucial tool for mitigating investment risks, and we are dedicated to guiding our clients through the entire process—from identifying the most suitable opportunities to submitting and managing grant applications.