UK SMALL BUSINESS GRANT OR GOVERNMENT GRANT
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The UK is one of the best places in the world to start and expand a small business. This Small Business Grant Guide gives information and sources of finance for small businesses.
The guide aims to throw light on the subject of grant, particularly for small business by making it easy to understand and dispelling some of the myths. |
By the time you finish reading this page, you will be on the right path to successfully submitting your application for a Government grant. The following will be covered:
- Are you missing out on business grants?
- Types of grant support
- Purpose of grant schemes
- Awarding Bodies
- Eligibility
- Making grant application
- Small business grants and frequently asked questions
- The 10 'Golden Rules'
The total value of support schemes applicable to UK businesses is estimated at £5 billion per annum. This guide is intended to help make sure you get your share.
1. Are You Missing Out On Business Grants?
If you are in business or thinking of starting one you may be wondering whether you can obtain any help from public funds.
You may be aware of others who have received grants, or you may have seen reference in the press to "form Europe" or grant award schemes from the DTI, or local council grants etc. If so you may rightly be asking "what about me?"
Finding out about grants can be a daunting task, even for experts. There are hundreds of different schemes being awarded by hundreds of different "awarding bodies" and schemes are constantly changing with some lapsing and new ones starting.
The good news is that most small businesses are eligible at any one time to apply for a number of different schemes. The problem is that no one knocks on your door to invite your company to apply! The onus is on you to find out what's on offer and to be up to date with information.
This guide should help your understanding of government grants and show you how you can find out which schemes apply to your business. Furthermore, as experts on the subject of grants, we can also help you with the practicalities.
2. Types Of Grant Support
Grant support for small business comes in a number of forms. The most obvious is the (cash) direct grant but other forms of assistance are also numerous. The main types are:
- Direct Grant
This is a cash item, which may be offered for activities such as, Training, Employment, Export Development, Recruitment or Capital Investment Projects.
It is rare to receive %100 grant funding. Most schemes require the recipient company to fund a proportion of the cost, with a figure of % being typical. Some schemes state maximum amounts in absolute terms, others have no limits.
- Repayable Grant
This is where cash funding is offered for a project with the intention that the sums are repaid out of future business revenues. The grant is not repayable in the event the project fails.
- Soft Loans
This is a loan where the terms and conditions of repayment are more generous (or) softer than those, which would prevail if the loan were made available under normal commercial terms.
The interest rate may be less than the on-going commercial rate for a similar loan and/or the repayment term may be longer. Sometimes the loan may be interest free.
- Equity Finance
Here a capital sum is injected into the business where the provider does not expect interest or repayment of the loan itself. Instead the provider takes an equity share (shares or stocks in the business) of the business, in the hope that the value of the shares will appreciate in the future, enabling the sale of the stake at a profit.
Unlike a venture capitalist, who would work in exactly the same way, the expectations and requirements of providers of public funds are less demanding in terms of eventual return required from the investment, and this is reflected in the terms and conditions and the criteria that the proposed grant funded project must meet.
- Free or subsidised consultancy
Often is it the lack of a particular skill or skills that which a small business needs - this is particular so in the case of start-ups and new companies. Some schemes in recognition of this fact, offer to provide these skills directly, via the utilisation, at free or subsidised rates, of consultancy services.
This is achieved by paying, in whole or in part, the fees of accredited or approved consultants who possess the skills the organisation lacks.
- Access to Resources
Sometimes small businesses don't possess the physical resources or facilities they need in order to develop particular projects. This can be the case particularly in manufacturing or research and development projects, where access to specialised testing equipment can be a drawback.
A number of schemes recognise this problem and provide access to publicly owned facilities (e.g. research facilities operated by the Ministry of Defence).
- Technology Transfer
New technological advances and practices are sometimes developed by small businesses but more usually come from larger organisations in the commercial, academic or public sectors.
The transferring of technology to a wider sphere can be a difficult and costly process. It can also take a long time to achieve. A number of schemes tackle this problem with a variety of means to help the faster achievement of transfer.
- Best Practice Transfer
There are a number of well-established quality and best practice initiatives. Some like Investors In People and ISO9000 apply throughout industry and commerce regardless of sector. Others such as the Lexcel scheme which applies to the legal profession, ISO/TS16949 2000 which applies to the motor industry are sector specific.
The transfer of best practice procedures from one organisation to another can often be achieved to the benefit of the recipient organisation and, for that reason, is encouraged by business support networks.
- Shared Cost Contract
The cost of research and development programmes can be prohibitive for companies and small businesses acting alone. Sharing the cost of such programmes with others whereby all participants share in the cost and consequent resulting know how, can be a solution. Such arrangements are often brokered, and sometimes part financed by public bodies and institutions.
- Subsidies
Some awarding bodies, whilst not always advancing cash grants will subsidise the cost of approved products or services used by firms.
- Advice And Information
Researching the information required to develop products, services and markets can be time-consuming and costly for smaller businesses. A significant input by public bodies goes to the provision of advisory and information services and a number of schemes are of this type.
- Packaged Assistance
The types of grant schemes identified above are not always delivered singly and to the exclusion of others. Often a grant scheme will consist of a number of separately identified types, each becoming one element of a package designed specifically for the recipient organisation.
Such schemes offer flexibility to meet the diverse needs an organisation has for help and assistance in respect of a particular project.
- Competitive Awards Schemes
Applicable to companies to attain industry recognition at national or even international level for outstanding performance through participation in one of many competitive awards schemes that operate, usually on an annual basis. Often sponsored by government departments, lead-bodies, even banks.
These schemes offer the chance to earn major PR results from the wide publicity generated. Many schemes also offer significant cash prizes or benefits in kind at category or overall winner level.
Note - Relocation Grants
Grants are not normally available for relocation within one of the home countries - the logic being that there is no overall advantage to the country in subsidising the move of a business from A to B.
However, there are incentives to attract companies to relocate from overseas to the UK or to set up operations here. There are also incentives to move from one of the home countries to another.
In addition, there are a number of differently defined "special Areas" through the UK. Within these areas a number of incentives are also available to those considering relocating to a special area or developing a product there
3. Purpose Of Grant Schemes
All publicly funded schemes have, as their ultimate purpose, the encouragement and development of trade and commerce. New and growing businesses create jobs and bring wealth.
Long term, governments strive to create the economic conditions which foster the start and growth of businesses. To achieve this objective public (taxpayer's) money is made available to help and encourage enterprise. The money is distributed by a number of government ministries, departments and quangos, both locally and nationally.
The European Commission (EC) is the main source of extra grant funding, also distributed through a variety of EC and other agencies.
Each awarding body has its own specific remit, objectives and may spend part of its budget on schemes to help achieve these. For example the Department of Education and Employment may offer grants to assist firms to employ or train new workers. It might do this directly through a nationally administered scheme or indirectly, by funding Business Link or the Enterprise Agencies, who will use this money to run their own schemes.
The result of this method of funding is that there are many schemes, offered by a large number of different awarding bodies. The variety of schemes will cover most if not all activities any one business will be engaged in, including the following:
- Employment
- Training
- Marketing
- Manufacturing
- Design
- Quality
- Exporting
- Research & Development
- Property/Premises
- Technology Transfer
- Environment
- Start-Up
Schemes are available to businesses across the UK although some will contain restrictions on application according to a number of different factors.
4. Awarding Bodies
Any publicly funded organisation is potentially a provider of business grants. However, some are more directly involved than others. Awarding bodies will be of European, national or local in origin.
a) European
The European Commission is the main source of funds provided by the European Union. It administers many schemes through its Structural Funds and by other means. Individual directorates (e.g. Enterprise DG, Regional Affairs, Agriculture etc) also operate specific grant schemes.
b) National Governments
In the UK National Government can mean the UK Government (i.e. Parliament at Westminster), the Scottish Parliament, The Welsh Assembly or the Northern Ireland Assembly. Each of these bodies has its own grouping of departments and agencies and, its own policy objectives.
The number of nationally awarding bodies probably exceeds one hundred. The most important ones are:
Department of Trade & Industry (DTI)
Department for Education & Employment
Department of Environment, Transport & the Regions
Industrial Development Board (N. Ireland)
Scottish Executive
Welsh Development Agency
Countryside Agency
Enterprise Ireland
Industrial Research & Technology Unit
c) Local
In addition the hundreds of local government authorities, any of which are grant providers, there are a number of locally based agencies and organisations which have been established to provide local business support. These include:
- Business link
- Small Business Service
- Enterprise Agencies
- TECs
- LECs
- Business Connect
- Enterprise Trusts
- County Enterprise Boards
- Scottish Enterprise
- Highlands & Islands Enterprise
......plus others
- Are you missing out on business grants?
- Types of grant support
- Purpose of grant schemes
- Awarding Bodies
- Eligibility
- Making application
- Small business grants and frequently asked questions
- The 10 'Golden Rules'
5. Eligibility
Qualifying for a particular scheme is dependent on three criteria:
a) Location
The UK is comprised of four separate Home Counties. Each has its own institution or awarding bodies offering their own schemes (including those offered by the UK government and the European Commission). The first element in the location criteria is the home country in which the business is based.
The second element is whether the business is based in one of the many "special Areas" into which the UK is divided. These areas are drawn up by the awarding bodies and may be drawn up for a particular scheme. To verify whether your business qualifies, you should contact the awarding body or consult the requisite map.
b) Size
Certain schemes are restricted to small to medium size businesses (SMEs) these are businesses with less than 250 employees.
Other schemes are specific in their defined target definitions and may restrict applications to those employing 50, or 20, or 10 employees.
a) Industry Sector
The industry in which the business operates is the third eligibility factor. This may affect eligibility on an inclusive or exclusive basis. Exclusive schemes are those which apply generally across industry sectors but specifically exclude a certain industry or sector. Such schemes are not common.
More likely to occur are industry specific (or inclusive) schemes. These are schemes which are established to tackle particular problems or issues affecting an industry sector.
Note
The vast majority of schemes apply without restrictions to location, size or industry sector.
6. Making Application
Prior to starting make sure you have thought through all the implications of your project and identified all schemes of potential benefit (See Golden Rules 1 & 6 below).
a) Before You Apply
Make sure you have the following arrangements planned or in place:
- You have matching funds available to meet any grant you may receive
- You can describe your plans as a project
- You have a written business plan
(see Golden Rules 3, 7, & 9 below for further explanation)
b) The Application
You should make personal contact with the grant provider before completing the application (See Golden Rile 10).
Make sure your application explains how the project will meet the objectives of the awarding body. Include a work plan, including full costings. Pay particular attention to describing your business's track record - you are applying for public funds and those responsible for making the decision need assurance you will spend it wisely and ensures the project completes.
c) Time scale
Generally, the more "local" the awarding body, the quicker you are likely to get a decision.
Applications to your local authority, TEC or Business Link are likely to be resolved in a matter of days or weeks. National bodies have more red tape and will take longer, perhaps several weeks, to decide. Many awarding bodies have fast track procedures to speed up the process.
Applications to the European bodies take the longest and waiting times can stretch into months rather than weeks. This is partly due to red tape and the nature of most European schemes.
Most European schemes are not constantly open to applications. Instead there are shorter periods during the schemes life when applications are considered. These periods are preceded by the issuing of notices known as "Calls for Proposals" which are announced in the official journal published daily by the EC.
7. Small Business Grants And frequently Asked Questions
The following are the most frequently asked questions about small business grants
i) How many schemes are there?
It's not possible to be exact but the number is large
The Enterprise Advisory Service main database of grants usually consists of over 3000 different ongoing schemes. However, this does not carry many of the hundreds of schemes offered by local authorities, enterprise agencies, TECs, Business Links and others
ii) How can I keep up to date with what's on offer?
There is no easy way to do this with your own resources. Changes are constantly occurring, with schemes being revised, introduced or withdrawn.
We suggest you take up membership of the Enterprise Advisory Service which is the least expensive and most convenient way to keep up to date. That way you will be able to interrogate the database at any time and see which grant schemes fit any current project.
iii) Who qualifies?
There is no business or industry sector, which is excluded from applying for assistance. There may be restrictions applying to individual schemes but these are in the minority.
Where there are restrictions these are usually in respect of size (normally measured by the size of the payroll) and this nearly always favours small companies. If location restriction applies they will be in favour of one or more of the areas that are specially defined.
iv) What sort of grants is available?
There are many different ways in which industry receives public support (see section 2 above for the more usual type of schemes).
v) Is it true that manufacturing companies are favoured?
No! Generally what a particular company does (whether it be in manufacturing, services, trade or whatever) is much less important than the number of people it employs and its contribution to local and national economy.
vi) Are grant applications competitive?
Since there is limited money in the kitty, each application competes with others. Some schemes are more competitive in that the awarding body will state in advance, that say the best 50 proposals received in a period will be successful. These types of schemes are not the norm.
There are some grant award schemes where the nature of the scheme is to find and reward the best applications, perhaps on a regional or national basis. Naturally the winners of these schemes will be very limited.
vii) Is the money taxable?
Usually where the grant is in the form of cash it is treated as normal revenue for the business and therefore subject to tax in the same way as ordinary revenue, after deduction of expenses and allowances. In some cases, elements or particular stages of a grant may attract tax liability.
Schemes which provide assistance in kind (i.e. where no cash award is involved) will not attract taxation.
8. The 10 Golden Rules About Grants
The assistance provided to small businesses is limited. There are likely to be more applications than can be satisfied by the resources made available. With competition you can enhance your chances of success by following the 10 Golden Rules:
1. Keep informed about which grants are available
You cannot apply for a grant if you are unaware of its existence! Grants are continually being introduced but there is no system, which lets you know automatically. You have to keep yourself informed.
2. Do not start your project before you make your application
If you start a project and then apply for a grant to help complete it your application will fail. The awarding body will take the view that by starting a project without a grant you must have had sufficient funds to complete it without assistance. Grants are only given for projects, which need them in order to go ahead.
3. Make sure your application is in respect of a project
Usually, grants are given for specific projects, not for the normal organic growth of a business. If, for example you need new equipment to launch a product make sure your application emphasises the project, not the equipment. State the advantages of the project's success for example it will safeguard or create jobs) and explain that the purchase of the equipment is pre-requisite for that success.
4. Apply as soon as possible
The chances of a successful application are always highest just after a scheme is launched. That is when there is most money "in the pot", and it's also the time when those administering the scheme are keenest to get applications in and grants awarded. Competition is likely to be less fierce. Try to keep an eye on new scheme launches and get in early.
5. Write your application proposal to match the Awarding Body's objectives
This doesn't mean you should be untruthful or misleading in your application, but it should show your proposal in the best possible light. Make sure you mention the benefits the project will bring. These benefits should fit in with the objectives of the awarding body and the grant scheme itself.
If there are benefits to others, such as the local community, or the country in the form of potential exports, make sure these are included.
6. Use your imagination
Again we don't mean you should be untruthful or make things up. But you should consider ALL the consequences of your project. In your mind it may be a project to increase business revenue and profits, but that is not the way to make a grant application.
Will you create employment opportunities? Will your staff need training? Could you use help in marketing? Are larger premises required? Will the project create export potential? Can you develop the project in a depressed or "special" area? By thinking in these terms you could find that you are eligible for several grants.
7. Have a business plan
Most grant applications require the submission of a business plan. You may have one already written, perhaps to raise bank finance. Alter the plan slightly to emphasise the project and its importance to your company.
8. Demonstrate that you cannot proceed without a grant
It is a pre-requisite with most schemes that the project be dependent on grant funds in order that it proceeds. You will therefore need to show that the project is dependent on the grant funding being made.
9. Make sure you have matching funds available
It is rare for a grant to finance 100% of the cost of any project. Typically a grant will contribute 15% - 50% of the finance required. You will have to prove that your business can fund the remaining cost to complete the project.
10. Talk to the awarding body before you apply
Make contact with the awarding body administering the grant scheme.
This has a number of advantages - you will be given advice on whether it's worth applying, before you start spending time and money on making the application; you may get some help and advice on completing the application form, you may get an "insight" into how you should shape your application and, finally, as in any business situation it is helpful if you can strike good personal relationship.
Information on government grant based on free guide from Govgrants global
Need help with small business grants?
We have relationship with experts who specialise in small business grants. If you don't have the time and resources to take advantge of grant aid, we can help you.
For a free initial consultation on grants and how your company may benefit contact
Government small business loan
Grant for small businesses in the Inner City
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