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The Ultimate Guide to Small Business Grants

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The Ultimate Guide to Small Business Grants

There is plenty to think about when starting a small business, and funding your new business ideas are often at the top of the list. Luckily, the UK government offers a range of small business grants to help new business owners get up and running with the aim to help stimulate the economy and create more jobs. 

We have broken down everything you need to know about qualifying, finding and applying for a small business grant in the UK.

What is a Small Business Grant?

A small business grant is a sum of money, granted to new business owners by the government to help them set-up their organisation. Grants are an ideal choice over a small business loan as they do not need to be paid back.

There are often some conditions your business must meet in order to remain eligible for your grant. These conditions will differ depending on the type of grant that you receive, but it is not uncommon for them to include a requirement for your business to match the grant investment. For example, if your grant is £20,000, your business may be expected to also invest £20,000 into start-up costs and activities. 

Who Qualifies for a Small Business Grant?

The qualifying terms for a new business grant will depend largely on the type of grant that you are applying for. There are however some broad criteria that most grants will require businesses to meet in order to be eligible to apply. 

As small business grants are designed specifically for new and small organisations, there is also often a maximum turnover threshold and employee limit. In most cases small business grants are capped at 250 employees and a turnover of less than £45,000.

Some grants are also location specific to certain regions or cities in the UK, and your business will need to be based in this location in order to be eligible for these types of grants. For example, you cannot apply for a grant for businesses offered by the local government in Oxfordshire if your business is located in the Sheffield City Region.

There are also several industry specific grants. Industries that generally have greater success in securing grants, and often a wider choice of grants to apply for currently include; Biotech, personal services, agriculture, retail, and wholesale, to name a few.

What New Business Grants are Available?

There is an ever-evolving selection of new business grants available to business owners across the UK. To find a grant to suit your business, you can find a complete list using the government’s business finance finder and regional funding portals. 

Some of the most common types of small business funding and grants include the following.

  • New Enterprise Allowance

The new enterprise allowance is a government grant and scheme to support new entrepreneurs. The scheme offers financial support as well as mentoring, a weekly allowance and a business loan to keep finances covered and get your business idea off the ground. 

This type of government business grant is available to those 18 years and over, and who either receive Universal Credit, Job Seeker’s Allowance or the Employment and Support Allowance, or be a lone parent or on Income Support for an illness or disability.

With this grant, entrepreneurs can expect to receive an allowance of up to £1,274 for 26 weeks once the business plan has been approved by a mentor.

  • National Lottery Heritage Fund

Designed for business ideas and heritage projects from landscaping design to cultural traditions, the National Lottery Heritage Fund offers a range of grants to suit all types of heritage projects and business plans. 

Grants under this scheme can range from £3,000 up to £1 million and above. Visit their website for the full list of grants offered by the National Lottery Heritage Fund.

  • Apprentice Grants

Taking on an apprentice as a business owner can also make you eligible for a government business grant. 

To be eligible for apprentice grants your business will need to have annual bills of fewer than £3 million per year, meaning you are not required to pay the national apprenticeship levy. Under this grant, the government will pay 95% towards the cost of training and assessing your apprentice, you will be required to pay the remaining 5% contribution. 

Under this scheme businesses can also claim incentive payments for new apprentices who join your company. This can be up to £3,000 per apprentice who has started their employment with you before 1st April and 30th September.

  • Local Government Business Grants

There are 38 regional ‘Growth Hubs’ across England offering supporting, funding and professional guidance for new business owners across their region. Depending on your area, grants and support can vary widely. 

To find a local government business grant to suit your new venture, search for support on the LEP Network website.

  • Innovate UK Grant

Part of UK Research and Innovation (UKRI), the Innovate UK grant is designed to support innovative ideas and business growth through grants and loans. 

The list of Innovative UK grants changes regularly and eligibility criteria will differ with each new opportunity. There are some instances where you may only be able to apply to an opportunity 1 time, even if you have been previously unsuccessful and applications reopen for a second cycle.

View the full and updated list of Innovate UK Grant opportunities on the government’s website. 

  • Research and Development Tax Relief

Not all grants are in the form of hard cash. Another government backed business grant is the research and development tax relief, offering periods of discounted corporation tax to businesses who are working on projects for the advancement of science and technology.

This government scheme is broken down into two types of relief, SME R&D relief and Research and Development Expenditure Credit. 

To qualify for SME R&D relief, your organisation must have fewer than 500 staff and a turnover of less than €100 million. This scheme allows companies to deduct 230% off of their qualifying costs from yearly profit and claim tax credit up to 14.5% of any losses made.

The Research and Development Expenditure Credit can be claimed by SMEs and larger corporations. Offering a tax credit of 13% of qualifying R&D expenditure.

How To Get Small Business Funding

There is a whole host of government business grants and funding opportunities available to entrepreneurs across the UK. The government’s Financial and Support online tool is a great place to start looking for funding and guidance, with the option to filter by your industry, size and region to find only grants you are eligible for.

There are also dedicated portals for small business owners in England, Scotland, Wales and Northern Ireland to help entrepreneurs find localised government grants and opportunities.   

The application process will differ between different schemes and grant types. To help you prepare for your application and speak to the grant body, be sure to read up on the grant’s objectives and align your application with their goals and ambitions. You will also need to have a professional business plan to present in your application as well as examples of your market position and balance sheet if you are already trading. 

While there are plenty of different types of funding and grants available, it is always best to start applying early to be in with the best chance of securing a grant for when your business needs it most.

Alternatives to Small Business Grants

While business grants offer a great funding solution for many small businesses, you may find yourself looking for alternatives if you cannot meet grant criteria or you are unsuccessful in your applications for a grant. 

Some great funding alternatives include equity finance and small business loans or ‘soft loans’.

Equity finance is essentially the process of selling a share of your business in return for finance. There are some schemes available that can offer up to a 50% reduction in income tax on investments made in new businesses of up to £100,000 through equity finance. For these types of support, businesses must be less than 2 years old and have fewer than 25 employees.

Soft loans and small business loans are similar to grants, but business owners are required to pay them back. Under the government’s Start Up Loans scheme, businesses can borrow up to £25,000 with 6% interest as well as access to mentoring and professional business support.

Conclusion

Finding a small business grant and support to get your new idea off the ground can be challenging, but there is a wealth of support and opportunities available both with government business grants and beyond. 

For more advice and information about getting started as a small business owner, view our blog posts and eBooks. Alternatively, get in touch with one of our knowledgeable team members for information on getting started accepting payments in your new business.