With the numerous funding options available today, it can be difficult to determine which options are best for your company. However, an important distinction that can help you narrow down your funding choices is the difference between dilutive and non-dilutive funding.
What is Non-Dilutive Funding?
There are many different types of non-dilutive funding. Put simply, non-dilutive funding is any type of funding that does not require you to give away any ownership of your company. Primary examples of this are grants and loans. A loan can come from a bank or a private entity, as long as it will be paid back with interest. Grants, on the other hand, are funding that does not have to be paid back. The opposite is, of course, dilutive funding, which includes financing options such as shareholders and venture capital investments. These are investments which require you to give a partial ownership of your company to the investor.
Types of Non-Dilutive Funding
The most common forms of non-dilutive funding are loans and grants. While this can include any loan or grant that does not require partial ownership, it is important to note specific grant options that exist within this framework. Grants are the most common non-dilutive funding option. Grants typically are provided to support specific projects and may require periodic status reports. Two common forms of grants are research grants andSmall Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants.
Research grants are somewhat self-explanatory; they are grants that provide the funding for research, build and test new products. They can also provide funds for educational research. SBIR/STTR grants are also very important to be aware of, especially for new start-up companies. These are grants that often address specific needs, and are issued specifically to small businesses by federal agencies to develop new processes, technologies, etc. Many of these grants have multiple phases as well as company size restrictions.
While research grants and SBIR/STTR grants are quite common, there are many other forms of grants, such as grants from non-profit foundations, or other federal or state government agencies. Regardless of what you choose, all of these forms of non-dilutive funding are great ways to further invest in your company and pursue the goals of your organization, while ensuring that you will retain all ownership of your company.
If you are interested in how SBIR/STTR might apply to what you are doing and other types of funding that you might be eligible for, we would love to talk with you. Please feel free to schedule a consultation call a HERE. Let us help you meet your M/WBE utilization goal. We can help you locate funding, apply for funding, and help organizations measure & report on outcomes. See our experience with grant writing and evaluation services HERE.
This post was written by our intern, Lindsay Robbins. She is currently an undergraduate senior at Towson University majoring in International Studies and Economics. At Towson University she has held several leadership positions including working with Model United Nations and as a Writing Tutor. She has also spent time studying and working in youth development organizations in Honduras and Peru. See more about Lindsay here.