What types of small business grants are available?

From direct cash grants to discounts on important resources, we cover the different types of business grant - and list some of the schemes available to particular entrepreneurs...

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  • Julia Watts

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Learn more about small business grants with our key guides:

Whether you’re already a small business owner or an aspiring entrepreneur who plans to start a business, finance is probably among your biggest concerns.

One of the most desirable sources of business finance is the small business grant; but getting your hands on one can be a complicated and rather stressful process.

Thankfully, there are countless schemes out there – each with their own purposes and differing sets of criteria – for you to apply for. The one that suits you best will depend on who you are and what your start-up aims to achieve.

What is a business grant?

Grants are usually publicly-funded schemes which offer cash awards, free equipment and tools – or reduced costs for using vital resources – to entrepreneurs and small business owners.

The cash awards given can range from hundreds of pounds to hundreds of thousands depending on the scheme, and you often won’t have to pay interest, give away equity, or even pay it back at all – a big reason why grants are revered as a fantastic option for start-ups.

By handing out grants, organisations aim to aid businesses who’ll have a positive impact on lives, a particular industry, the economy or the availability of jobs. So, tempting as it is to think of it as free money, keep in mind that the awarding body will want a valuable output from your business (just like you do).

What types of grant scheme are available to start-ups?

Direct grants

The most well-known form of grant finance, a direct grant is a cash award usually given to a business so it can carry out a specific project.

Most direct grant schemes will require you to match the grant amount in money you raise by yourself – so, effectively, you'll usually put up 50% of the cost of the project. There will also likely be regulations involved and agreements to be set in terms of how you can spend the grant money.

The government’s ‘business finance support finder’ directory lists over 300 direct grant agencies and aims to help you find the right scheme for your start-up.

Resource and training grants

Often, start-ups find themselves unable to afford the resources, skill sets, expertise or facilities they need to develop particular projects.

Fortunately, initiatives – including incubator and accelerator schemes – that provide access to experts and publicly-owned facilities are run across the country. The below are just a few examples…

  • Innovation Vouchers: Supplied by the government through Innovate UK, these packages offer up to £5,000 to pay for you to enlist the help of an external expert – ideal if you need help in a particular field, be it product design, intellectual property management, tech innovation or something else.
  • Local advice and support: Many local councils across the UK run their own business support grants which, as well as providing access to grant money, also provide ongoing support in the form of workshops, accelerators, expert advisory services and training for free. Contact your local authority for more details!
  • Business support networks and best practice initiatives: Technological advances and new best practice initiatives in certain industries can often take a long time to filter down to smaller businesses. The government has set up a series of expert networks and initiatives to share knowledge sooner and address this disconnect.
  • Business support helplines: UK government bodies offer regional helplines which give free, personalised advice over the phone (England’s helpline is also accessible via email, web chat, Twitter, Facebook and Youtube).

Tax relief

The costs of paying taxes can be debilitating to start-ups, so the government runs a number of schemes which aim to reduce them; for example:

  • Business rates relief: You're eligible if your business only occupies one property, and the rateable value of that property is less than £15,000.
  • Employment Allowance: This enables you to reduce the national insurance contributions you pay for your staff by up to £3,000 per year.
  • Corporation Tax relief: If you're investing in research and development, you may be able to apply for Corporation Tax relief on the project.

And the list goes on!

It’s also worth looking into Enterprise Zones – designated UK areas which offer tax reliefs and support to the eligible businesses launching in them.

Tax benefits are also on offer to investors to incentivise them to back newer (read: higher risk) start-ups. The government’s Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), for example, help early-stage businesses raise finance by providing tax relief to investors who gain equity in them.

Soft loans

Alternatively, a soft loan is a special type of finance where the terms and conditions of repayment are more generous (or softer) than they would be under normal financial circumstances.

So, for example, the interest rates may be less, or there may be no interest to pay at all, and the repayment terms could also be for a longer period.

While these aren’t actually classed as grant schemes – you’ll need to pay them back! – they are often government-backed and, like a grant, can offer support in other aspects of running your business too.

There are hundreds of organisations that offer soft loans and guarantees, but the most notable is the government-funded Start Up Loans Company, which offers new businesses loans of up to £25,000 for 6% interest, a 12-month repayment “holiday”, and business mentoring.

As of April 2018, The Start Up Loans Company has lent a total of £400m in 54,000 loans.

Not sure whether a grant is the best option for you? Don’t forget to look at our comparison of six popular sources of business finance!

The business grants available to particular entrepreneurs

While many grants aim to support particular types of businesses, there are plenty that are equally interested in the entrepreneur(s) behind them. For example:

Business grants for women

With male-owned businesses more likely to attract funding, organisations are increasingly looking to fund women in business and give them a more even opportunity to succeed.

You can check out the business grants available specifically to women in our guide to grants for female entrepreneurs.

Read more: Support groups and resources for female entrepreneurs

Grants for young people starting a business

With young entrepreneurs often cited as the future of UK business, plenty of awarding bodies are keen to support them.

One of the best-known is The Prince’s Trust, which offers mentoring, support and funding to entrepreneurs aged between 18 and 30. Others include UnLtd, which supports young social entrepreneurs, and Shell LiveWIRE, which awards young entrepreneurs who are tackling the world’s energy and resource crises.

Business start-up grants for over 30s

That being said, entrepreneurship certainly has no age limit, and grant schemes won’t discriminate against older entrepreneurs.

In fact, starting a business in your 50s is now easier than ever, and while there are no age-specific grants for over 30s, grants and other alternatives to more traditional investment play a huge role in this, offering cash, reduced-price resources and benefits to aspiring business owners of all ages.

Another suggestion is that, if you have pension savings, these could be used to help finance a business. It’s a finance route that’s not well-known (and not right for everyone) but can prove useful in the right circumstances.

Business grants for social entrepreneurs

If you’re starting a social enterprise or charity, you’ll find help from organisations such as Big Issue Invest – the investment arm of the Big Issue – which offers soft loans from £50,000 to £1m to positive impact, socially-driven entrepreneurs.

It also operates ‘participation loans’, where repayment is linked to the future performance of the enterprise.

As mentioned above, UnLtd also offers funding packages to social entrepreneurs to help them develop their ideas and grow the impact their enterprise can have.

Business start-up grants for unemployed entrepreneurs

You don’t need a spotless employment history to go far in business, and the aims of The New Enterprise Allowance (NEA) grant scheme reflect this thought.

Started by the government, the NEA helps unemployed aspiring entrepreneurs who are claiming Jobseekers Allowance, Employment and Support Allowance or Income Support to fund their business ideas.

Find out more about the NEA – alongside other grant schemes for unemployed aspiring entrepreneurs – here.

Business grants for bad credit

Unlike bank loans, the majority of grant schemes won’t turn entrepreneurs away based on their credit history.

Government bodies in particular aim to boost the economy by encouraging enterprise and creating new jobs as small businesses grow, so try searching for government grants in your area.

Just be wary that, rather than assessing your credit score, many will want to know whether or not you can match the funding they award you.

What's next?

Now you know about some of the most popular types of grant scheme, it's time to start looking for the perfect one for your business or start-up concept.

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Julia Watts
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