Grant or loan: What’s right for your business?

Choosing between a grant and a loan depends on your business goals, project type, and timeline.

In a nutshell, grants are a good option if you qualify for funding for a specific initiative and want to minimise financial risk; whereas loans are perfect when you need fast access to cash, flexibility, or support to grow at scale.

Let’s break down what each option offers so you can decide what fits your business best.

What is a business loan?

With a business loan, you borrow money from a bank or lender—usually to fund growth, smooth out cash flow, or invest in your business. You get a lump sum upfront and repay it over time—with interest, of course.

There are different types of business loans, and the right one depends on what you’re trying to achieve. Common options include:

• Business line of credit: Gives you access to funds up to a set limit, and you only pay interest on what you use.
• Invoice finance: Allows you to access funds tied up in outstanding invoices, cushioning the impact of late payments on your business.
• Trade finance: Helps businesses cover the upfront cost of goods, locally or internationally.
• Merchant cash advance: Gives your business quick access to capital, with repayments tied to your daily sales.
• Business term loan: Lets you borrow often without using assets as security, with approval based on your business’s finances and credit profile.
• Equipment finance: Designed to fund business machinery. You own the asset from day one, but it's used as security for the loan.
• Business car loan: Allows you to purchase a vehicle to use for business purposes, while spreading the cost out over time.
• Lease agreement: Lets your business use equipment, vehicles, or machinery without buying it upfront.
• Secured term loan: You use an asset as collateral to access lower interest rates, longer terms, and higher borrowing amounts.
• Business acquisition loan: Provides funding to purchase an existing business, often covering the purchase price and other initial costs.

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What is a business grant?

A business grant is essentially free funding from the government or other organisations that you don’t have to pay back, as long as you meet certain criteria. The goal? To encourage specific actions, like ramping up in R&D, creating local jobs, or cutting carbon emissions.

You apply and, if approved, receive money, vouchers, or other forms of support. In return, you’ll often need to report how you spend the funds.

Business grants can be:

• Federal: Funded by the Australian government to target big-picture priorities—think rebuilding after disasters or boosting exports. Budgets are often larger, and eligibility tends to be broader.
• State: Run by each state or territory, with a focus on local growth, priority industries, and job creation.
• Local: Offered by city councils, shires, and municipalities—usually smaller in funding but less competitive and easier to access.

Choosing between a business grant vs loan

To make your choice easier, here’s a side-by-side look at the pros and cons of each:

Can you combine loans and grants?

Absolutely! You can use grants where available and loans to cover gaps or scale beyond what the grant alone would allow—getting the best of both worlds.

Let's say you land a grant to fund an innovation project, but still need a loan to keep day-to-day operations running smoothly. You might apply for a working capital loan, which will help you manage cash flow, pay staff, and cover ongoing expenses without interruption.

At Valiant, we think of grants as a “bonus boost” and loans as the steady certainty and flexibility you need to stay on track.

Think a business loan is right for you?

At Valiant, we help Australian SMEs access fast, flexible financing.

We compare loans from 90+ lenders to match you with the best fit and handle the application from start to finish—so you focus on growing your business. Reach out today to get started.