3 Pitfalls to Watch for in the Grant Application Process

Insights from the Field

Scott Spencer


Three Mistakes to Avoid on Grant Applications

Recently, SRF founder Michael Sussman wrote about the mistakes most commonly made by rail businesses when presenting their projects to attract capital. His observations on working with banks and investors got me thinking about my experience helping companies and organizations apply for grant funding. Among the potential pitfalls in the grant application process, here are the big three that need to be addressed for success.

First, many folks who are seeking government or foundation funding fail to adequately review the project eligibility, application requirements, and selection criteria. This leads to incomplete submissions and irrelevant content that doesn’t correlate to what the reviewing board wants and needs to make a decision. All information pertaining to a program’s target sector, project types, insurance requirements, grant match requirements, document formatting, and other details are typically presented up front by the grantor and should be fully understood by applicants prior to submission. The application format, flow and content must strictly follow the instructions provided. Give yourself plenty of time early in the process to conduct these critical steps. To avoid wasting time, use the Q&A process to confirm that your project is eligible for the grant program.

Second, it is critical and yet uncommon for applicants to write a clear and concise grant narrative that fully describes the designated use of funds. Exactly how will you deploy the new capital to advance your project? Will you be using the grant funds to launch a new project or grow an existing one? Be as detailed as possible, so award committees are confident that you have planned appropriately for where the money will have the greatest impact.

Third, applicants must articulate the wide-ranging benefits that will accrue to stakeholders. Grantors want to know how their capital will impact communities, employers, workers, new jobs, regional growth and more. Provide evidence for these project benefits by including as many letters of support as you can gather from elected representatives, economic development officials, shippers and other stakeholders.

We look forward to hearing about your experiences with grant funding and any questions you may have.

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Michael Sussman


Two Mistakes Rail  Businesses Make

For 25 years, I have dedicated our advisory firm to helping rail businesses and rail projects attract all the capital and success they deserve. Having spoken with thousands and worked with hundreds of clients, we see a pattern in almost all their presentations and approaches when trying to secure funding and support. Enthusiasm is high, clarity is low. Belief is great, facts are short. Frustration rages, progress eludes. Let’s reflect on and learn from this dynamic. Perhaps, you’ll recognize it in your own efforts. I invite you to respond with your thoughts and ideas.

Individuals and teams presenting rail projects for funding can expound on their project for hours but miss two basic elements of effective business communication. The first is that while they know what they want to say, they haven’t considered what the listeners want to hear. The second is that they don’t introduce their project logically before they are off and running with voluminous verbal and written material.

Too many project presenters focus solely on the promise of their project, without covering the risks. They either have not taken the time to anticipate an investor’s concerns, or they don’t want to for fear of opening a can of worms. Yet those are the only worms that can catch a big fish, so understanding and thoughtfully addressing them is job one. Funders, lenders, and investors will have very logical concerns. The more they express these the better, as that is how you know they are interested. Presentations should proactively surface and address the concerns that any thoughtful investor would have about a project or company. Pinpointing the risks along with how well you have planned for mitigating them has to be at the heart of any successful rail project plan. That is the only way to come across as an intelligent and successful entrepreneur who represents a sound investment.

Business people are keen on delivering file upon file of drawings, plans and related project material, yet they rarely write a clear executive summary and introductory letter. These are critical elements to assist an investor or lender in entering your world, regardless of the overall vision and merits of your project. They don’t have your inside track on what it’s all about, and you need to pave the way for their understanding.  

When have you made these common mistakes and possibly left lenders and investors in doubt about you or your project?



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Michael Sussman


Closing the Gap Between Lenders and Railroads

Which is greater right now? The national political divide or the chasm of misunderstanding that railroads face with communities, government, and lenders? Both divides must be bridged for America to be great.

Certainly, the misunderstanding that plagues railroads hinders good projects, good companies, and good communities. We all suffer in the balance.

For 25 years, Strategic Rail Finance has been a warrior for rail development that serves the economy, the environment, and the community. We continue to create funding and growth strategies for many of the rail industry’s biggest challenges. In more than a thousand meetings in Washington, we have had the opportunity to help educate Congress and the Executive Branch. Two decades of interactions with owners of shortline and regional railroads have taught us plenty. In 2007, we created a non-profit transportation consultancy, OnTrackNorthAmerica, to advance comprehensive transportation planning and investment.

To this day we encounter banks undervaluing assets of rail-related companies, citizens minimizing the contribution of railroads, and government planners misunderstanding the transportation marketplace. We aim to share what we have learned—what does and doesn’t work for growing railroads — from financial statement analysis to project scoring to land use planning.

For this launch issue of Insights from the Field, let’s shine a light on one particularly harmful and rarely-grasped practice at the heart of nearly all business’s borrowing relations with their lenders. The documents executed at closing of a typical loan transaction more than likely assign the lender a lien on all the borrower’s assets. Even as loan balances are being paid down, the documents give the bank a lien on not only the assets owned at the time of closing but all the assets brought into the company until the loan is paid in full. Since businesses use their borrowed capital to grow, the company’s assets will have grown over time. It is likely that there is now more inventory, equipment, vehicles, receivables and even cash. While the bank gets more secure each month, management is not able to use these additional assets to access additional capital to expand further. Banks love this arrangement and you won’t hear much about it in the business literature.

This status quo has had a particularly harmful impact on rail-related companies that often operate with less access to capital than businesses of much less stability and importance to the community. Their assets and contribution are misunderstood and under-appreciated. It’s time to bridge this divide once and for all, to fully realize the contribution of rail transportation to national and local vitality.

Insights from the Field is a publication of Strategic Rail Finance. Feel free to share it with colleagues. All issues are available on our website if you would like to add or comment. Or simply respond to this email with your thoughts.

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