If your startup or small business is looking for funding, one option is to apply for a business grant. However, with the strict eligibility criteria and fierce competition for funds, what do you need to consider before applying?
What is a grant and can my business get one?
A grant is a sum of money given by the government or a public or private sector organisation either for a general purpose (eg to start a business) or something more specific (eg to research specific overseas markets).
To access grants, normally you or your business must satisfy strict qualification criteria. Sometimes grants are only available to startups, in other cases more established firms can apply. You may have to operate in a certain sector or location. A grant might only be available to those who sell or want to sell overseas or to a business owner from a specific group, whether that’s linked to gender, ethnicity, age or other criteria.
You do not have to pay back a grant, of course, but you are required to repay a loan. Sometimes relatively modest sums (up to £1,000) are available via grants, but others offer UK SMEs up to £100,000 or more in grant funding.
The truth about small business grants
In reality, grants are few and far between and competition is fierce. For various reasons, applications are not always successful, although there are many things you can do to increase your chances of approval.
In some cases, grants might only cover a proportion of costs, for example, if they are given for projects. So, you may need to work out whether your business can come up with the rest of the funding and work out how this will affect your cash-flow. You may not receive a grant until a project nears completion.
Applying for grants takes time and effort, which creates a cost implication for your startup or small business. But you should never rush the process and your research must be thorough. You should apply in good faith and not include any information that isn’t truthful or accurate, otherwise, you may be asked to repay a grant.
Those who administer grant funding could ask to see a project or business plan as part of your application. Grants are normally only made available before a project starts, not after you start, so your timing is key. You need to manage your time well if you are to get your application in before the deadline.
Where can I find out about startup and small business grants?
Other sources of startup or small business funding
As we’ve highlighted, making a successful grant application can be difficult. It’s good to keep your options open.
Aside from borrowing money from friends and family, here are some of the most common funding routes for startups and small businesses.
You might be able to get a startup loan from the Start Up Loans Company, for example, a UK government-backed programme that offers startup loans of between £500 and £25,000 at a fixed interest rate of 6% per annum.
If you’re aged below 30, The Prince’s Trust could be another option. Also, contact your local business support organisation (eg Local Enterprise Partnership in England) to see what non-bank loans are available to startups or small businesses in your area.
A bank will carry out a credit check on you if you’re not an existing customer, but it may not expect any security for smaller amounts. And you can usually get a decision very quickly after applying, especially if you’re an existing customer.
This is likely to involve conceding some ownership and control over your business, but the investment and contacts it can bring could make a huge difference to your ability to achieve your business ambitions.
In recent years, many startups and small businesses have been able to raise money through crowdfunding. This is where groups of investors pay relatively small sums to together fund businesses seeking investment.
For pledging a small amount, investors receive a stake in the business or a return on their investment or other benefits (eg discount on products or services). Crowdcube, Growthdeck and SEEDRS are all popular crowdfunding platforms.