GRANT GUIDE · 6 MIN READ
How Federal Grants Work: Grants, Contracts and Loans Explained
What a federal grant is, how it differs from a contract or a loan, who gives grants, how the money moves, and what you take on when you accept one.
- Where grants are announced
- Grants.gov, the official site
- Cost to apply
- $0
- Open federal grants at any time
- Usually 800 to 2,500
- The rulebook
- 2 CFR 200, the Uniform Guidance
- Agencies that give grants
- About 26 departments and agencies, through hundreds of programs
A grant pays for your project, not the government's purchase
When the government buys something for its own use, mowing at a base, software for an agency, a bridge, it uses a contract. When it wants a public purpose served and pays someone else to carry it out, feeding children, training workers, studying a disease, restoring a wetland, it uses a grant. The difference matters because a contract is a purchase with a price and a delivery, while a grant is financial assistance with a plan, a budget and reporting. UX Contract covers both: bids on the contracts side and grants here.
A loan is the third thing people mix up. Federal loans, like SBA loans, must be paid back. Grants are not paid back as long as you do what the award says. That is also why grants carry more rules about how the money is spent and accounted for.
Who gives federal grants
Every federal grant comes from a program that Congress funded, run by a department or agency: Health and Human Services (the largest by far, including the National Institutes of Health), Education, Agriculture, Transportation, Housing and Urban Development, Justice, Energy, the Environmental Protection Agency, the National Science Foundation and others. Each program has an Assistance Listing number, a five-digit code like 93.073 that identifies it across every notice and award.
Many federal dollars reach local organizations as pass-through funding: the federal agency awards a block to a state, the state awards it on to counties, cities, nonprofits and businesses. If you are a small nonprofit or a city department, more of your federal money will come through your state than straight from Washington, and those sub-awards are announced by the state, not on Grants.gov.
Formula grants and competitive grants
Formula grants go to states and sometimes cities by a formula in the law, usually population and need. There is no competition; the recipient is set and the money follows the formula. Competitive (discretionary) grants are the ones you apply for: the agency announces an opportunity, applications are scored, and the best funded. Almost everything on our grants pages is competitive.
How the money moves
A grant is not a check. After the award you draw funds as you spend them, usually through a payment system such as the Treasury's ASAP or the agency's own, and you report what you spent and what you did. Costs must be allowable (the rules in 2 CFR 200 say what counts), allocable (tied to the project) and reasonable. Spend outside the approved budget and you can be asked to pay it back.
Cooperative agreements are grants where the agency stays closely involved in the work. Our pages label each notice as a grant or a cooperative agreement; the application process is the same.
What you take on
Accepting an award means agreeing to its terms: doing the work in the plan, keeping records, filing progress and financial reports on schedule, following rules on equipment, procurement, conflicts of interest and civil rights, and an audit if you spend $1 million or more in federal funds in a year. None of this is hard for an organized group, and all of it is written down before you apply. Read the award terms as carefully as the notice.
Sources
Grants.gov, Grant Programs 101 and the applicant guidance
2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2024 revision)
SAM.gov Assistance Listings
Checked October 2026. Thresholds and rules change; each source above is the official page.
