Hidden Costs of Capital Grants
If there is any grant that crushes the myth that “grants are free money,” it is the capital grant. Capital grants are used for physical infrastructure, such as constructing a new building or installing an HVAC system, and are not as prevalent as program grants. Applying for a capital grant, especially from a government funder, typically requires significant planning and expense.
If you are considering applying for a capital grant, here are some questions to help you address your grant readiness (in addition to our free GRASP Tool) and clear hurdles:
- How will you pay for the project?
This is probably not a question you expected to be asked.
Some capital grants are reimbursement grants, meaning that you front all of the costs and are reimbursed later. You may need to secure a term sheet for a bridge loan, or provide bank statements showing sufficient funds to cover project expenses.
- How will you pay for your share?
You may be required to provide matching funds. For example, you may be required to fund 50% of the project cost yourself. The funder may require that this be entirely in cash, or they may allow you to count the value of donated services.
- Are you sure about that capital campaign?
You may be thinking “We will just launch a capital campaign immediately upon hitting the Submit button! In fact, this capital campaign is already in the ‘planning’ phase! We just planned it now!”
This is easy to write, but when your project is funded and you are the newly appointed director of the capital campaign, what will your level of confidence be?
Also, how much will it cost to implement a capital campaign? The grant will not cover this.
- How much will it cost?
To justify your project budget, you may have to (or should) provide professionally developed cost estimates.
For an architect to provide a reasonably accurate construction cost estimate, they need to evaluate your project and produce plans. Capital grant funders do not always pay for pre-development costs, and typically do not reimburse expenses incurred prior to the start of the grant contract. Having plans and cost estimates to attach to your grant application demonstrates “shovel-readiness,” which increases competitiveness.
- Is the Board on board?
Executing a grant contract for a capital project commits your organization to potentially acquiring debt, spending time and money implementing a capital campaign, or spending its reserves. The Board needs to agree to the financial requirements before you submit the application.
- What are you going to do with this building?
A capital grant is an investment by a funder in your project’s intended use. What is the ROI?
Does the project’s intended use align with the funder’s priorities?
How will your project meet the community’s needs, and how do you know? If applicable, have you invested in a market analysis?
Do you have a business plan to guide and fund the operation, marketing, and maintenance of the completed project and the services or community amenities it supports?
If your organization needs funding for a capital project, or an RFA for a capital grant has landed on your desk and you need support, our team is here for you! Contact us to learn how we can help you navigate the capital grant process, from assessing your capital grant readiness to providing a competitive application package ready for submission.