The obvious difference
The grant is free, up to $10,000 per month. Paid ads cost whatever you spend. For most nonprofits that alone settles the question of where to start. But the grant is not simply free paid advertising, and understanding the differences prevents disappointment later.
The grant only runs on Google Search
Grant ads appear in Google search results and nowhere else. No YouTube, no display network across other websites, no Gmail placements, no Google Maps ads. Paid advertising opens all of those. If your goal is broad awareness rather than capturing people already searching, the grant cannot do that on its own.
The bidding constraint
Grant accounts have a maximum cost-per-click limit that paid accounts do not, which means grant ads generally sit below paid ads for the same search. In competitive categories your grant ad may rarely surface at all. Smart bidding strategies can help work around this, but you are structurally at a disadvantage on any keyword businesses are willing to pay well for.
The compliance overhead
Paid accounts have no click-through rate requirement, no mandatory conversion tracking, and no risk of being deactivated for going quiet. The grant has all three. That is a real ongoing cost in attention, even though the advertising itself is free.
When the grant is clearly the right choice
Start with the grant if people are already searching for what you do, if you are targeting long-tail specific phrases rather than competitive generic ones, and if you have somebody who will maintain it. For the large majority of nonprofits and churches, the grant covers most of what they need and there is no reason to spend money before using it fully.
When paid advertising earns its cost
Paid makes sense when you need to reach people who are not searching yet, when you are running a time-sensitive campaign and cannot risk the grant's lower ad position, when you want video or display placements, or when you are competing for keywords where the grant's bid cap keeps you invisible. Year-end giving campaigns are a common case where paying for a few weeks is worth it.
Most mature nonprofits run both
The grant handles the steady always-on work of capturing existing search demand, and it costs nothing. Paid gets switched on for campaigns, giving seasons, and events where position and reach matter. They complement each other, and running both from the same strategy is more effective than treating them as separate efforts.
The order that makes sense
Use the grant fully before spending a dollar. Most nonprofits are using a small fraction of their $10,000, which means there is free advertising sitting unused while somebody considers a paid budget. Max out the free money first, learn what converts, and then use paid to amplify what you already know works.