Helen Burnett-Nichols
Mary Flory
When it comes time to fund post-secondary education or grow a small business in Canada , grants and loans are two popular options available to help you cover the costs. But while the criteria to qualify for grants and loans can be similar, loans come with a future repayment obligation — whereas grant money is yours to keep.
What is a grant?
A grant is a type of funding that you are not required to pay back. All levels of government in Canada — federal, provincial and municipal — offer grants for different purposes and types of recipients. Other entities, such as foundations, also offer grants to organizations.
Types of grants in Canada
Grants for businesses, non-profits and community organizations
Canadian businesses, non-profits, charities and community organizations are eligible to apply for thousands of grants and interest-free loans offered by the federal and provincial governments, funding everything from research to hiring and growth. Some grants are aimed at specific sectors and charitable or local initiatives. Private companies and foundations also offer hundreds of grants each year, providing funding for everything from environmental projects to art programs.
Student grants
The Canada Student Grant (CSG) is offered by the federal government to full- or part-time post-secondary students who demonstrate financial need. Students from most provinces and the Yukon are eligible; students in Quebec, the Northwest Territories and Nunavut are not, as those jurisdictions have other student aid programs.
For the 2023-2024 school year, the CSG offers a maximum of $4,200 per year or $525 per month of study for full-time students, or $2,520 per year for part-time students.
Financial need is based on a student’s family size and gross family income in the previous year. For example, to be eligible for the maximum Canada Student Grant in 2023-2024, a student in a family of four must have a gross annual family income of less than $70,859. To qualify for the minimum CSG amount, a student in a family of four must have a gross annual family income of less than $123,676.
A student’s eligibility for grants and loans are assessed together when the student applies for federal financial aid through their province. The student can choose whether to take out the loan or to just receive the grant.
The federal government also offers Apprenticeship Grants for individuals training in designated skilled trades.
Students may be eligible to receive more than one grant. For example, additional CSGs are also available for full-time students with dependents and for students with disabilities. Students may also be eligible to receive grants from their province of residence.
What is a loan?
Loans are lump sums of money borrowed from the government, a financial institution or an online lender to fund personal, educational or business expenses.
Loans are extended for a certain period of time and are typically required to be repaid with interest.
Alberta student loans, for example, have a 12-month interest-free grace period after a student finishes their program. On the first day of the 13th month, a monthly payment schedule is set up for the student automatically, with interest accruing daily and being calculated monthly.
However, some loans stay interest-free throughout repayment. For example, federal Canada Student Loans no longer accrue interest as of April 2023.
Grants vs. loans: differences
The main difference between a grant and a loan is the requirement to repay the funds. A loan needs to be repaid, but a grant does not.
With a student grant, the money is provided for school expenses with no strings attached. A student loan is extended with an agreement to repay the amount, plus interest (if applicable), after the student finishes their program.
Another difference between grants and loans is their flexibility. For businesses and non-profits, grants may come with conditions as to how they may spend the funds. For example, the Canada Job Grant provides $10,000 to $15,000 per trainee to support the cost of upskilling new and existing employees. Business loans often have fewer restrictions as to how the company can spend the money.
The grant application process also can be lengthy — lasting weeks or months in some cases — while financial institutions often make decisions quickly on business loan approval.
Grants vs. loans: similarities
Both grants and loans are types of funding that provide individuals, organizations and businesses with the capital they need to pay for their education or fund growth.
For students, grants and loans have similar eligibility criteria. Through the Canada Student Financial Assistance Program, students are assessed for grants and loans via one application — and are required to be enrolled in post-secondary education and meet certain financial requirements.
For businesses, lenders will consider a company’s financial statement and business plan before deciding whether to approve a loan. Grant issuers also will consider these factors, as well as more specific eligibility criteria.
How to choose between a grant and a loan
The choice as to whether to take out grants, loans or both comes after you’ve been deemed eligible. Deciding whether a grant or a loan is best for your situation may require considering factors like:
For students:
- Whether you have other means available to pay for educational expenses, such as a registered education savings plan or other savings plan.
- Whether grants alone are sufficient to meet your needs, or whether you’ll need to supplement those funds with loans.
- Your plans for being able to repay the loan after graduation (and interest, when applicable).
For businesses:
- How quickly you need the funds, since grants often take longer than loans to be approved.
- Whether you need flexibility in how you spend the funds or how much funding you receive (for example, you may have business expenses that fall outside the limitations of the grant).
Frequently asked questions about grants and loans
The main difference between a student loan and a student grant is the requirement for repayment. A grant is essentially a financial gift that comes without a need for the student to repay the funds at the end of their studies. With a loan, the student agrees to borrow the money for the duration of their program and pay it back, in some cases with interest, after graduation.
You do not have to pay back grants in Canada. However, it is important to note that grants are awarded based on eligibility. With a student grant, for example, if your status changes during the school year — such as if you switch from a full-time program to a part-time program, you withdraw from school or your program end dates change — you may receive a grant overpayment that could be converted into a student loan.
