When it comes to alternative funding sources, private grants are an attractive option if you can get them. Every year, non-profit foundations and other funders pour significant sums of money into enterprises with a typical emphasis on those that promise socially beneficial innovation. As with any form of financing, however, there are both pros and cons that come with private grants.

What makes this form of capital most attractive is that it’s inexpensive money – you typically don’t have to give up equity in your company in trade for the grant. By definition, you also do not have to repay a grant.

Grants can also offer a startup credibility in its industry. Citing a grant can make partnerships more viable or make customers believe that your startup is more legitimate.

The biggest challenge with grants lies in obtaining them. Funders can be slow to make decisions, putting your team through a lengthy, rigorous process with a very uncertain chance of success.

Private grants aren’t for most startups, as the social benefit of the company’s mission must typically be robust enough to appeal to grantors. For those companies that do qualify, can get access and are patient enough to endure the process, however, grants can be an inexpensive source of capital.