Unlike loans, grants are not repaid. This creates the impression grants are a source of free money. When the amount of time and effort put into applying for a grant gets factored into the equation, it becomes obvious the money is not free. Grants may also have a narrow focus, restricting the number of applicants with projects fitting the scope of the grant.
One disadvantage with grants is focus. The Small Business Administration, for example, provides grants funded with tax dollars for a variety of projects, but it does not have grants for starting a business or expanding a business. In addition to a narrow focus restriction, grants likely align themselves with individuals and groups sharing the same set of core values.
When applying for a grant, understanding the philosophy behind the organization giving the grant is necessary. For example, if someone with a pro-capitalist project needing funding approaches an organization providing grants to organizations promoting socialist agendas, this is not a good grant match.
Another disadvantage with grants is geographic location. Many states have grants for projects in the home state. If a grant in Pennsylvania is only available to businesses in Pennsylvania, a business in Texas is out of luck for that grant. However, if that same business in Texas needs grant money to assist in a new computer business model designed to help out small businesses in Texas, funding through such grants as the Texas Emerging Technology Fund are available.
A common area of complaint when seeking out grants is time consumption. Applying for a grant is a labor-intensive and data-intensive activity. While private grants tend to be less intense than seeking federal grant funding, all grants require time and energy in order to submit an application. Requirements for some grants are complicated, requiring in-depth examination of the grant proposal and submission process. In some cases, individuals and groups hire professional writers with grant writing experience to assist in the process.
The grant requirements are also a potential disadvantage. Some grants, especially grants involving federal funding, require data tracking and submission. This leads to paperwork, as well as additional man-hours. Since taxpayer money is used in the grant, making sure the money is not wasted is of paramount importance. While private grants are not as restrictive, tracking data is sometimes a condition of the grant.