Grant Funding Risks

GRANT RISKS TO WATCH OUT FOR 

Whilst winning grant funding can provide numerous benefits, there are also risks and challenges to be aware of:

• Long-Term Strategic Alignment and Opportunity Costs 
  It’s essential that your grant funding proposal aligns closely with your long-term strategic goals and roadmap for product and commercial development, so that your time is invested in a priority activity that moves your business forward. Remember that resources spent on applying for and managing grants might have been used for other strategic initiatives that could offer higher returns or align more closely with the company’s core objectives 
   
• Administrative Burden 
  Applying for and managing grant funding often comes with stringent documentation requirements. Make sure you have the resources to support this administrative burden and suitable systems in place to cope with rigorous monitoring. This can be time-consuming and resource-intensive, potentially diverting focus and resources away from day-to-day business activities and impacting upon overall performance
   
• Compliance Risks
  Failure to meet grant compliance requirements (including financial reporting, progress updates and adherence to project timelines) can result in penalties and clawbacks of funds, as well as being damaging reputationally. Make sure you read the small print and avoid getting locked into a project that restricts your ability to exploit the results. Likewise, beware of any constraints (particularly around Intellectual Property) that could inhibit the way you plan to use the project outputs
   
• Project Management Challenges 
  Grant agreements often require sticking to predefined project plans and timelines. This can limit a business’s ability to pivot or adapt to new information or market conditions. Where partners are involved, it’s important to establish clear agreements and communication channels to manage coordination effectively and get the most out of the relationship
   
• Financial Risks 
  Plan your cash flow as grants are typically reimbursed in arrears based on incurred expenses. This means that the business needs to have sufficient upfront capital to cover initial costs, which can strain cash flow. Delays in grant reimbursements can further compound these pressures
   
• Match Funding Risks
  As you will most likely need to find match funding to cover a portion of the project funding upfront, it’s important to explore sources of match funds well before applying for the grant. Failure to meet the match funding requirements (such as not providing the match funds or misreporting expenditures) can result in penalties, loss of funding or future grant ineligibility
   
• Partnership Risks
  Where other partners and stakeholders are involved, it’s important to establish clear agreements and communication channels to manage coordination effectively and get the most out of the relationship. Coordinating with multiple partners can introduce risks if parties fail to deliver on their commitments. Choose your partners carefully and ideally, start off with smaller, shorter projects to trial working together before progressing onto higher value initiatives. If you do encounter serious intractable issues, raise them with the grant monitoring officer to discuss options and identify solutions

• Long-Term Sustainability
  Future grant availability is uncertain and competitive. Businesses may not be able to secure ongoing or follow-up grants, which can jeopardise long-term projects initiated with grant funding. This can lead to incomplete projects or abandoned initiatives. Relying on grants for critical projects can create a dependency, making the business vulnerable to changes in grant availability or policy shifts 

TIPS FROM OUR EXPERTS

“Be very careful that your product roadmap is deciding which grants you apply for, rather than the grant calls deciding what your product roadmap is.”

 

“Make sure that the grant project is in really close alignment with your strategic goals, especially if it’s a lengthy commitment.”

 

“Grants have different consortium and funding rules, durations, scopes and intervention rates. Do your research and understand what’s on offer before you sign up to anything.”

 

“Choose an appropriate grant mechanism that works for your problem and stage of company development. Think of it as using the right tool for the job that aligns with your longer-term goals.”

 

“Most VCs do a lot of due diligence, especially in the early stages. Don’t wait until after you’ve got the grant to reach out to VCs. Allow yourself enough time to find match funding.”

 

“If you’re looking for match funding and you’ve already been offered the grant, you’re probably too late. It will lead to frustration all round. Make sure you work that out before you apply for the grant.” 

 

“Don’t forget about the other forms of matching you can use, such as retained profit. If the grant is small enough that you can self-match, it’s an easier way to get it over the line. Bank loans don’t tend to kick in quick enough for security.” 

 

“To score bonus points on your application, start a discussion with your current investors and gain their agreement for a follow-on investment as match funding for your grant. That’s a very positive statement to be making.”