Recoverable Grants: The Basics - Loans for Women

Recoverable grants, (which are also known as forgivable loans), are a unique type of grant where a philanthropist or non-profit organization decides to lend out money on the hope that an entrepreneur will be successful. If an entrepreneur is not successful, they don’t have to pay anything back, regardless of how much they originally borrowed.

Two types of options are available with recoverable grants: put options or call options. With the put option, a grant maker is given payment when the entrepreneur achieves a particular milestone. For instance, if the put option specifies repayment when the business earns a million dollars, the grantee owes nothing until that milestone is reached.

The call option works in an opposite manner. Basically, the grantee has a financial obligation to the loan until they achieve a certain milestone. When this happens, they can request that the rest of their obligation become eliminated. Usually the grant-maker obliges because they already received the funds they were expecting.

Now, in terms of finding recoverable grants, the process is the same for both put and call options. Potential grantees will need to search anything related to philanthropy, since usually philanthropists are one of the major providers of forgivable loans. And such a search can begin with two publications: The Chronicle of Philanthropy and The Philanthropy Journal.

You can also find forgivable loans among general grant resources. For example, if you visit Barnes and Noble, you will find a plethora of books regarding grant suppliers. You could also visit websites associated with government grants, (which can be found with a simple search engine query).

If all else fails, you can consider researching non-profit organizations, as they are the second major supplier of forgivable loans. You can begin this search by looking at non-profit organizations in your area. Visit the centers in person and ask if they are offering any recoverable grants. If you ask this question to the main person in charge, you may get extra consideration for the grant, because you established a more personal connection.

There is also the option of searching nationwide non-profit organizations. The Local Initiative Support Corporation as well as the Mass Development Assistance Program are just a couple of examples of non-profit organizations that will offer recoverable grants to any eligible applicant within the United States. You can find more by searching the websites associated with Guidestar, Foundation Search America and The Foundation Center.

If you do win a forgivable loan, you could receive between $2,000 to $50,000, though there are a few loans that go into the millions. Either way, just make sure that you’re properly budgeting your money, so if you do have to pay the grant back, you won’t be in a financial bind.