Grants are given to help businesses that cannot find finance. The main feature of a grant is that it is not repayable, and as such, is certainly worth looking at as a source of finance.
Grants are given out by the government at a local and national level as well as by other smaller bodies such as the Arts Council and the Prince’s Trust. Competition for the money can be fierce and funds are limited, so a business needs to carry out a lot of hard work to realistically stand a chance of getting the cash.
Grants are for specific projects. Generally, grants are given for up to half the cost of a project (between 15% and 50% is normal), and never the entire amount. Your business has to provide the rest. This shows your commitment and helps ensure grants are not given to risky businesses who are unwilling to invest their own money.
Equipment and machinery, IT, commerce spending, research and development, expansion or relocation are areas covered by most grants. A maximum of £75,000 can be given for help with land or business costs. Grants are not given for use as working capital, or for work or purchases that have taken place. Neither are they given for interest charges, road going vehicles, rent costs or hired assets bought through an operating lease.
Do you qualify for a grant? In the vast majority of cases you need a detailed idea of a specific project you want to finance. You need specific targets and goals which need to be presented as a crucial part of the grant application. For example stating that you wish to apply for general research funding will get you nowhere. Be precise and state what kind of research you will carry out, as well as your aims and objectives and when you expect to achieve them. It helps to have a good business plan available as this helps show your business has planned effectively, has a good business model and is worth providing funding for.
Most organisations who give grants are looking for businesses that are expanding or creating jobs, particularly in poorer areas. Conversely, if your project will cause the loss of jobs it is almost certain not to be accepted. Manufacturing business or services for manufacturers gain the most grants, although almost every type of business will be considered. There is a wider range of funding for small businesses, generally those with 10 or less employees. European funding may also be available, though the time scale is often up to a year. There is no limit to the amount you can apply for in the EU, but you won’t receive more than 50% of the project costs, and some activities are limited to around £60 000 of benefits every three years to prevent unfair competition.
Also worth considering are allowances for new starters in business. People registered as unemployed can sometimes collect their benefits while trying out a business idea, so as not to lose all their income. In some cases grants and a subsidy can be paid to employers, including the self-employed. The rules vary by age group. Entrepreneurs under thirty years old can get grants and loans from the Prince’s Trust, amounts ranging from a few hundred to a few thousand pounds. Other initiatives exist for disadvantaged communities or groups. All are worth considering.