We know that one of the biggest challenges facing any new venture is funding. That’s why grants, as opposed to loans, can be vitally important. It’s also why we’ve created this guide to help you.
Contents
Business Grants vs Business Loans?
Who can apply for a startup business grant?
What do you need to apply for a grant?
Which business grant should you apply for?
Where to go for more information on small business grants?
Business Grants vs Business Loans?
Chat to any entrepreneur and an injection of cash during the early stages of their work often makes the difference between success and failure. This can come from a variety of sources including friends and family, venture capitalists, funding angels, banks and other lenders, or simply personal finances. The difference between these and a ‘start-up a business grant’ is typically the latter comes from government, charity, or a regulated private sector organisation. Critically, it doesn’t have to be paid back.
The most obvious difference between a grant and a business loan is that loans require repayment. The debt is normally a commercial arrangement with interest payable to make it profitable for the lender. There are likely to be penalties involved in not making your repayments too.
There are advantages to taking out a loan. They are more widely available than grants. Grants often have a competitive application process pitting you against other business ideas for funding. This is rarely the case with loans. The amounts are typically more generous too.
Businesses often take out specialist start-up loans from banks and other lenders including government sources, keen to form ongoing relationships with them. Terms are often favourable and interest rates more affordable for entrepreneurs starting with so-called ‘Soft start-up loans.’ It’s easy to be swept up by marketing, but the fundamentals of a loan don’t change whatever special offers are applied. They need repaying and come with a cost to the borrower.
Does a business grant have to be repaid?
A ‘starting a business’ grant is typically given with a different purpose than a loan. It is a gift and, while there are typically conditions attached for the receiver, it shouldn’t require repayment or directly make money for the institution providing it. Grants may be awarded by Central or Local Government departments, trusts, corporations, businesses, educational institutions, charities, other non-profits or even individual philanthropists. They will typically have a specific interest in supporting small businesses generally or be related to a specialism or particular market.
The benefits of gaining a grant, over a loan, might seem self-evident however the figures involved are typically smaller and the process of gaining a grant can involve lots of unpaid work to complete an application process. There is rarely guaranteed success, so this effort might not necessarily get a return.
It is important, then, to understand the benefits and risks associated with both forms of finance. It is likely your new business will use both at various points in its development.
How do business grants work?
Business grants come in a wide range of types, sizes and from a variety of sources. UK Government grants for small businesses, for example, vary from straightforward cash awards to more involved tax relief tools.
A wide variety of other institutions from charities to industry-specific trade associations provide small business grants to spend on specific aspects of your business plans. These might include training, infrastructure, product innovation, exporting or recruitment. There is particular support available to recruit young or under-skilled workers. Such schemes, however, may require businesses to fund up to 50% of any initiative themselves with a grant being viewed as a support or a top-up rather than sole direct funding.
It is worth doing some research and considering what small business grants are available as you plan any business venture. That way you can factor in specific opportunities to get help. All grants need you to prove your eligibility and demonstrate the money will be invested appropriately.
Who can apply for a startup business grant?
Each business grant start-up scheme will have unique eligibility criteria. Some are available for sole traders and the self-employed but most will need your business to have a ‘Certificate of Incorporation’ registered with Companies House. This confirms you are a legally trading business entity.
Once that’s complete, business grant providers may ask for a range of other evidence related to your business. This may include business plans, marketing plans, financial statements, forecasts, product detail, employee details and so on. It is good practice to have such information to hand.
It is also important to always check the small print to understand how each business grant works before applying. Applying for a grant you are not eligible for is a waste of time for you and your business.
What do you need to apply for a grant?
It is likely that any grant you apply for will require a thorough and detailed application process – particularly if they are funded by the taxpayer. This ensures fairness, transparency and accountability.
You have a better chance of winning any grant if you plan your approach carefully and ensure you have everything in place well ahead of any deadlines.
It is always worth getting in touch with the grant-awarding organisation to discuss your chances of making a successful application and to chat over any aspects you’re not too sure about before starting any work. Some grant bodies allocate funds on a first come first served basis, so applying early could raise your chances of securing too.
You will need to demonstrate and grant money awarded will represent a sensible investment. This is typically through sharing your business plan. It pays to make this a thorough, detailed high-quality document. You need to demonstrate awarding your business funding will have a positive impact in line with the grant scheme goals. It will probably need to include financial reports and forecasts. This is one of the many areas you can get direct help with from My New Venture.
Each business grant scheme will be different so avoid sending standard responses. Highlight in your application how the specific grant helps your business – whether that is developing a new product or employing extra staff. The important thing is to ensure you can demonstrate a match between your goals and the goals of the grant scheme.
Which business grant should you apply for?
There are many grant options available to small businesses. The picture changes over time too. If you’re looking for a list of opportunities available currently, the Government’s Business Finance Support Finder is a great place to start searching for options relevant to your business size, location and marketplace.
You can also search by region around the UK.
Small Business Grants in England
Small businesses in England can turn to Local Enterprise Partnerships (LEPs) for help with funding and advice. Each is a partnership between Local Authorities and the local business community. Their task is to create economic growth, jobs, employee skills, and improved infrastructure. Talking to your local LEP would be a great step for any new business.
Small Business Grants in Scotland
Scottish small businesses can get help from the Highlands and Islands Enterprise or Scottish Enterprise as well as their local councils. The devolved Scottish Government maintains the Scottish Government Funding Opportunities list of over 600 funding sources. It is an invaluable resource for any new venture North of the border.
Small Business Grants in Northern Ireland
Northern Irish small businesses can visit Enterprise Ireland for information on where to find grants. Examples include NISPO II’s Proof of Concept grant which is specifically designed to help establish new ventures. Invest NI grants are available for companies that have existed for longer.
Small Business Grants in Wales
Small businesses in Wales can find advice and information on grants using Business Wales’ Finance Locator. The locator holds details of over 1,000 potential grants. It is the ideal place to start researching for local help.
Where to go for more information on small business grants?
If you don’t find what you’re looking for above, you might want to explore a range of other organisations including Regional Growth Funds, Innovate UK, The Prince’s Trust, the National Apprenticeship Service, Kickstart Scheme for young employees, and the Seed Enterprise Investment Scheme (SEIS).
It is also worth joining local business networks or industry trade associations. Find a business-facing similar changes to you and ask for help. Most business people and entrepreneurs who have succeeded with grant applications are happy to share their tips and advice based on their experiences.
Frequently Asked Questions
Am I eligible for a small business grant?
If you have a new business with plans for growth, you are likely to find a grant scheme that is right for you. It is worth doing your research and checking the small print regarding their eligibility requirements or, even, contacting them to ask directly about your plans.
What small business grants are available?
There are countless grants available from a range of government agencies, charities, industry-specific bodies or even individual philanthropists. Grants vary from capital cash injections through help recruiting and training staff to grants for specific equipment or services. Once you’ve got a business plan together, it’s worth investing time in researching help that is available.
Are small business grants taxable?
Grant income is generally considered taxable income and you will need to include that in any financial planning. It is important to get appropriate advice from an expert at every stage of your business growth.
How do I get a small business grant?
Once you’ve found a grant that fits the bill, it is worth checking the rules, application process, and requirements carefully before committing to applying. Are you eligible? How long will it take to apply? Is it worth your while? Will I have to match the funding from other sources? What will I have to report back once I’ve spent the grant? Understanding all these questions will help you increase your chances of success. Best of luck.
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