What are the differences between a Loan, Grant and Investment?


A Loan: is money, assets or other sensible/ valuable goods provided to a second party in debt for future repayment of the loan value amount, in addition to interest or other finance charges. A loan could also be for a pre-defined, one-time amount or could be available as an open-ended line of credit up to a stated upper limit. Loans could be supplied by individuals, financial institutions, corporations or even governments.

The loan’s terms and conditions are validated upon the mutual agreement of both parties of the transaction prior to transmitting any goods. Usually, loans have requirements about the maximum amount of interest, along with other bonds like the length of the period before repayment is due. Multiple factors can distinguish loans and affect their costs and conditions.

It is important to mention that in a loan there is no risk sharing, which means that regardless of the business result, repayment of the amount borrowed would be required in addition to the specified interest if exists.

A Grant: A grant is a gift, given by a certain party (usually a foundation, company or government) to another individual or a company usually. Grant funds are provided in order to accomplish a goal or incentivize performance. Grants are essentially awards that do not acquire repayment, under most conditions.

The key variance that exist between grants and loans is repayment. A loan requires repayment of the money lent, whereas a grant usually does not.

An investment:  is an attained asset or a used tool with an intention of making future revenue or appreciation. Economically speaking, an investment is the purchase of goods that are not consumed at the present yet are used in the future to make fortune. Risk sharing exists in an investment, whether a business succeeds or fails, investors are affected by the results.

Taking any action in the anticipations of collecting future revenue is also seen as an investment. For instance, when choosing to pursue further education, the aim is frequently to increase knowledge and advance skills in the hopes of eventually making more income.

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