Incentivizing Behavior

• Governments and other grant providers use the funds they make available to incentivize certain behaviors. For example, when the federal government increases the number of grants available to low-income students, it makes it easier for more people to attend college. Government grants also apply to businesses that research energy-efficient technology and local organizations that provide assistance to disadvantaged members of the community. By providing grants for certain types of medical research, universities and pharmaceutical companies can target the most severe or easily-solved problems in the field of health.
  
  

No Repayment

• Unlike loans, grants don't need to be repaid. This means that an organization that receives grant money has the power to spend it according to their own goals and not worry about making a profit or laying out a budget that includes provisions for paying down debt or paying interest on the funds. It also means that there is less follow-up or oversight of grant money, since the organizations that give it don't have a specific financial stake in the grant recipient.
  
  

Reputation Building

• Certain grants are well-known and provide a reputation boost for the individuals and organizations that receive them. Large grants can legitimize a type of research and may help the recipient generate interest or further investment in the cause. Grants and fellowships such as the MacArthur Fellows Program, also known as the Genius Grant, bestows some degree of fame and attention on their recipients, thereby launching new careers in the natural sciences and humanities.
  
  

Directing Goals

• Organizations that rely on grant money can use the power of grant money to bring their organizational goals and policies into order. The grant money provides an incentive for laying out practical, useful plans and communicating this information effectively in the grant application. An example would be a local police department that relies on grant money from the state government. To apply for the grant, the department will need to identify specific areas of need in the community and lay out a plan for using the grant money efficiently. The department becomes accountable for its actions and performance record in order to continue receiving the grant each year.