Recoverable grants may be used to address concerns of non-profit boards that are hesitant to take on any type of debt. Some boards may have a policy that they’re not willing to take on debt, no matter what the upside is. We’ve had several situations where we became creative with our approach. We would say, “Okay, we really believe in this new social enterprise you’re doing, or we think this new program that you’re putting together could be profitable. So, how about we provide the dollars to you as a grant, with the understanding that if and when you become successful and profitable, you will return 30 cents of that first dollar and every dollar back to us until we receive our grant dollars back, and you keep 70 percent to continue with its growth.”
We would treat that as a recoverable grant, where we’re not booking it as a program-related investment (PRI) and its risk. However, there’s a shared expectation, if they’re profitable, that they’ll return the dollars.