Government grants are a great way to fund your small business, and there are plenty of options out there if you know where to look. These grants can help you save money, lower your costs and grow your business. But it is not always clear to startups what they need to do in order to become eligible for a government grant, or even which ones it’s worth applying for.
So in this article, we’ll take you through the factors that influence whether your business might be eligible for this kind of funding solution, and what your best options might be.
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Importance of acquiring funding
Securing funding is an extremely important part of running a business successfully. Being able to acquire commercial finance at the times you need it, opens up a whole world of opportunities for your business.
It allows you to keep your business running smoothly, to invest in new machinery, new IT equipment or further training for your staff, to increase your workforce or your output and take your operations to the next level. None of these things would be possible without funding solutions.
What are government grants?
Government grants might, on the surface, seem too good to be true given that they are injections of money or products that do not need to be paid back. But whilst government grants are indeed a fantastic boost for the individual or business who directly benefits, they are also usually designed as a way of promoting a greater good for society. That might be boosting growth in a particular sector to help strengthen the economy, helping people to enter training or work which increases the number of qualified people in areas where there might be shortages, or to help with something like energy conservation which benefits the environment as well as keeping individuals’ fuel bills down. Most of these kinds of grants are usually targeted at new businesses and, if you qualify, are a fantastic way of getting hold of funds which most importantly, don’t have to be repaid. However, the down side is that they are usually very limited in number and hard to win. Grants for established businesses are usually even rarer.
There are as many as 200 government grants available for small businesses at present, each of which has been designed to address a particular need of society or industrial sector. Despite the fact that there are so many grants available, getting them sanctioned for your business can be a real challenge.
The application process can be long and complicated in nature due to the many processes and stages that an application goes through before successful bids are announced. Each grant is likely to have its own eligibility criteria and requirements which only make them appear more complex in the eyes of businesses.
If you wish to take advantage of some of the grants available and you fit the eligibility criteria, the following guide will take you through what you need to do in order to maximise the possibility of your startup being successfully awarded one.
Where can new businesses find government grants?
Businesses can find more information about government grants from the UK government website and from the Scottish Parliament, as well as via Northern Ireland and Welsh Assemblies.
Businesses in the UK which want to apply for grants will find useful information on the government web page, Business Finance Support Finder.
Similarly, startups in Ireland can access information related to funding for small businesses on its government website, Enterprise Ireland. If you are a startup based in Scotland, you can find details of over 600 grants and other funding options on the Scottish government’s funding opportunities website.
What are the different types of business grants?
Grants sanctioned by the government for small businesses are available in various forms, from cash rewards to grow your new business, to free equipment and discounts to reduce costs. Generally, government funding boosts are either equity finance, direct grants or a soft loan.
Equity Finance
Equity finance isn’t technically a grant, but it can be a big help to your business. The Seed Enterprise Investment Scheme is one example of equity finance for which those businesses which have been around for only two years or less and do not have more than 25 employees, are eligible. Equity finance offers an income tax rebate of up to £100,000, or 50 percent, whichever is lower, on investments made in new businesses.
By utilising the money obtained through equity finance, businesses can cover their essential expenses such as investment in equipment, training, or exploring new avenues to grow their business such as overseas exports.
Funds of up to £0.5m can be awarded to businesses on the condition that these startups provide 50 percent of the grant’s value. The amount of capital you may receive also depends on the sector in which your business operates.
Direct Grant
Direct grants are money given to your new business to cover start-up essentials such as training or investment in equipment. Grants can be for just a few hundred pounds, or anything up to half a million pounds, dependent on your sector.
To be eligible you may need to be growing a particular type of business which brings about the regeneration of a local community, or fit a certain criteria such as having been in business less than a year, or being a company that is looking to start exporting overseas. The only ‘catch’ to many of these grants, as such, is that your business may be expected to match the grant money with your own funds.
Soft Loan
Unlike direct grants, soft loans are, as the name suggests, repayable, but they offer generous repayment terms with lower interest rates making them a good option for startups as they are more new-business friendly compared to finance obtained through other lending routes.
The Startup Loans Scheme is another government backed initiative which provides personal loans of up to £25,000. Startups are also given access to free mentoring and business support and they are required to pay interest at the rate of just 6 percent.
How to apply for a business grant
As stated earlier, each scheme has its own set of terms and conditions. Since each scheme is different, businesses must check whether they are eligible before proceeding with filing an application. Most grants have been designed for specific purposes.
The following are some tips that startups can follow to successfully apply for a grant:
Communicate with the grant body
To correctly assess the chances of your application being accepted, you must talk to the body which awards the grants. Get as much help as is being offered throughout the application process to boost your chances of being successful.
Read their objectives
Before making an application for a grant, try to understand what the grant aims to achieve and why it is being awarded. For instance, it may be the objective of a grant to develop environmentally friendly products or to increase the number of employed individuals in a local community. Write an application which explains how your business will help the body to achieve their objectives.
A good business plan
This is a basic requirement and one that you must fulfill, irrespective of whom you approach for finance. The body which awards grants will certainly make your business plan the basis on which they accept or reject your application. Your balance sheet and business position will also matter, if you have trading records to show.
Apply early
The time when a scheme is just launched is the perfect time to apply for it. Making an early application increases your chances of receiving a grant. Another reason to invest early is that each grant has a designated budget to invest and as time passes and more applications are received, there is greater competition to face and lesser funding available.
These pots of government money and incentives might seem too good to be true, but they offer real opportunities to businesses. Though they might be competitively fought and hard to come by, it’s always worth taking the time and effort to put in a strong application as they are unbeatable ways to give your business an advantage. Following the above guidelines should put your startup in a better position to make a successful bid.
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