Grants vs Donations: What Funding Source is Right for You?

Grants, loans, investors, and now donations too? Understand the differences by reading our blog series comparing the different funding options available to small businesses.

When seeking funding, particularly through the Pocketed platform, you should be aware of all the options available to you! We’ve already discussed Grants vs Investors and Grants vs Loans in their own blog posts, so now it’s time to talk about Grants vs Donations!

‘Donations’ is probably a word you’ve heard a lot, especially when it comes to charities or public fundraisers. But you may not have heard it when it comes to talking about your business. Well, that’s okay, because we are here to tell you all about donations and how they compare to grant funding!

Like loans and grants, donations are non-dilutive. This means they don’t take away your company equity which is extremely important to small businesses. An example of a dilutive funding source would be investors because most investors want to take a percentage of your company in exchange for their funding.

So, what are donations when it comes to businesses?

Donations are how a lot of businesses get off the ground! Whether it’s close family or friends, founders will often garner the support of their loved ones’ who provide donations.

So, donations from loved ones is one way to receive a business donation. But it’s not the only way!

Donation-based crowdfunding is a second type of donation for a business. Crowdfunding is a way to raise money for your business, cause, project, prototype, etc. by seeking money from a large group of people, usually through social media, in relatively small amounts.

Note: There are different types of crowdfunding and some entail a promise of future equity, profit-sharing, rewards, or a loan structure.

You may have seen GoFundMe pages created to support a new project or business in the past. Every time someone donates to one of these support funds, that is considered a non-dilutive donation. They give you money with no equity in return.

The differences between crowdfunding and grants includes the reliability and time aspects.

You can never fully rely on crowdfunding because you don’t know how many contributors you’ll get and how much they’ll donate. Even if 100 people donate $20 each, that’s still only $2,000… possibly enough to fund a small portion of your business, but definitely not enough to make a new hire, fund a research project, or expand to a new market.

If you have a big following and a lot of donations, you could potentially fund some of your major projects. But, getting a lot of crowdfunding won’t be easy by any means. When it comes to grants, you can pick a grant with a short application process to ensure you’ll get your money quicker!

Obviously with grants you can’t guarantee you’ll secure one, but there are a ton of non-competitive grants you can apply to and you’ll have a great chance at securing some cash.

Donation-based crowdfunding is a great start. It also proves that people are interested in your business or idea, or even gets people talking about your company. But because of the small sums you’ll receive in donations, and the time it takes to get a decent number of donations — you cannot realistically support a business this way.

With grants, you can choose the program that works for you — you’ll know application length, grant amount, and additional key factors before you even apply! (Tip: Pocketed lists these filters right on our platform! ✨) When looking for the right funding for your business, it’s important to consider all options. Grants, loans, donations, investors ­– what works for you?

If you think grant funding is right for you, create your free Pocketed account today to access up to hundreds of funding programs right at your fingertips.