Whether you are starting a new business or have your sights set on growth, chances are at some stage you will need a cash injection to support your business. 

A business loan might seem an obvious choice. However, before you go down that route, you may benefit from learning about the different government grants on offer.

What’s in this article?

  • What are small business grants?
  • What are the types of grants available?
  • How can you apply for a small business grant?
  • What other finance options may be available?

What are government small business grants? 

Government grants for small businesses are different from loans in that you don’t have to pay them back. They come in varying sums of money – from hundreds to thousands of pounds – and are available through schemes that operate both on a national and regional level.

Some are designed for those already in business, while others help people who are just starting out. Most grants are aimed at specific industries or community groups, so they’re not open to everyone. 

There’s high competition for grants because it’s essentially free money. You’ll have to check eligibility criteria because there may be certain things you have to prove before you can apply. Some may also ask you to match the amount. For example, if the grant is £5,000, you may need to match it with £5,000 too. 

Still, none of that’s a reason to give them a miss. Grants are a very attractive form of finance, not just because there are no repayments but because they won’t need you to give up any equity in your business or offer any security like you might have to with a loan.

Types of grants available

When you start a business there are many different grants that may be of use: 

Start-up grants

There are dozens of grants available if you’re just starting out in business. The New Enterprise Allowance, for example, provides mentoring and an allowance for those wanting to start or develop a business idea. 

Grants for young people

Certain grants are limited by age to young entrepreneurs. If you’re aged between 18 and 30 and meet certain other criteria, you can get a grant of between £1,000 and £5,000 for the government’s Enterprise Programme for Young People. The Prince’s Trust also works with 18-30-year-olds to help them develop their business ideas.

Grants for specific sectors

Certain grants are limited by industry so you can get help if you’re in tech or digital innovation, for example. The National Lottery Heritage Fund offers grants from £3,000 to over £5 million for heritage-based projects.

Taking on an apprentice  

You can also get help if you employ an apprentice. An apprentice can be a great way to get someone working for you, who you can train up exactly how you want. The government’s Kickstart Scheme provides funding for employers who create job placements for 16 to 24-year-olds on Universal Credit.

Equipment grants

Some grants might not give you cash but will instead provide funding for buying equipment or paying for training. 

Where can I find out more about government business grants?

The UK Government website has a whole list of organisations offering grants around the country. You can search by industry, amounts available and so on. You can also take a look at smallbusiness.co.uk, the Federation of Small Businesses and local authority websites for further advice.

Don’t forget to check out the Local Enterprise Partnerships (LEP) Network which has 38 growth hubs around England. They’ve been set up to provide funding, support and advice all under one roof.

How to apply

  • Competition is fierce, so get in quick as soon as you know funding is going to become available. Make sure you know when the deadlines are, so you don’t miss them.
  • Check the grant criteria before putting pen to paper. The last thing you want is to get halfway through the application process and realise you just don’t meet the requirements.
  • If in doubt about anything, talk to the awarding body. You might be able to sound them out about your chances of success before you put in loads of work on an application.
  • Consider how much you’re willing to invest – you’ll need to match the grant amount in many cases.

If I can’t get a grant, how else can I get finance?

Don’t despair if you aren’t successful, there are plenty of other ways to sort your small business finance: 

The Government-backed start-up loans scheme offers amounts between £500 and £25,000 to people new in business. Although not a grant, it’s an unsecured loan at a favourable fixed interest rate of 6% per annum. Repayment terms are between one and five years and you get 12 months of mentoring thrown in. You need to live in the UK, be over 18 and have been trading for less than 24 months.

It may not be a grant exactly, but you might qualify for tax relief on your research and development from the government. This is particularly relevant if you work in a science and technology field.

There’s also equity finance. The Seed Enterprise Investment Scheme offers attractive tax breaks for investors who put their money into small start-ups. You may have to hand over equity in your business, but it could give you a much-needed cash injection as well as some seriously good business expertise.

While you’re getting everything in place to fund your small business, keep on top of your business finances with Countingup, the business current account and accounting software in one app. With automated bookkeeping and simplified tax returns, you can focus on making your venture a success. Find out more here.