Government and agency funding comes in two economically different forms that are easy to lump together. A grant (or non-repayable contribution) is money the company keeps outright if it meets the programme’s conditions, true non-dilutive capital with no payback. A repayable contribution is money the company must return, sometimes unconditionally on a schedule, more often conditionally, repaid only if the project succeeds, the product reaches market, or revenue crosses a threshold, occasionally as a royalty on future sales. Some programmes blend the two, part grant, part repayable.
The distinction matters because it changes the real cost and the balance-sheet picture. A grant is the cheapest capital there is. A repayable contribution, even an interest-free, success-contingent one, is a form of soft financing: it may be recorded as a liability, it can reduce the non-dilutive benefit on a present-value basis, and crucially it can be treated as debt-like in a future financing or acquisition, reducing the equity value at exit in the same way other debt-like items do. Money that felt free when it landed can re-appear as a deduction in an EV-to-equity bridge years later.
The operator discipline is to read every term sheet for the repayment trigger and classify the funding accordingly, not by the marketing label the programme uses. The questions: is it repayable at all, under what conditions, on what schedule, with what interest or royalty, and does it convert to a grant on failure or stay owed. A clean non-dilutive stack distinguishes the kept money from the owed money, so the runway it shows is honest and so a future buyer finds no surprises in the contribution agreements.