The answer will depend your lender. Some lenders will be fine with you using grant money as a down payment for the loan. However, many lenders will not see that as you risking anything into the business. They want to see you have something on the line and have some “skin in the game” so that they feel comfortable that you’ll do what it takes to make the business a success. Owners not having capital in the business is considered a risk. You should ask your potential lender directly if they would accept those funds because they’ll ask you where your downpayment is coming from.