Small business grants, as an injection of much-needed funding, can offer the springboard to take your business to the next level.
With an overwhelming range of grants available, it will take considerable research, often with professional advice, to find out which best suit your needs by matching the scheme criteria with your business circumstances and what you are trying to do.
Most business grants have a specific purpose or focus, rather than being general to businesses. Award criteria can include factors such as business location, sector, whether you are a start-up, the age of the business owner and the type of product or service you offer.
Types of business grants
No two business grants are the same. Some offer outright ‘free’ financing, while others give different types of financial support, such as subsidised loans. In all cases, you will need to make some kind of application and show you meet the requirements of that particular scheme’s grant or loan.
Business grants are generally not intended to fully fund business ventures. You will be expected to take on a certain amount of the financial risk, so you may need to seek investment from other sources.
Small business grants
There are many different types of grants available for small businesses, both from the government and the private sector, from cash awards to tax reliefs. Examples of small business grants:
Regional Growth Fund (RGF)
The RGF is for eligible businesses looking for funding of less than £1 million.
The fund is accessible through a small number of specific programmes run by national or local organisations, with assistance given to businesses either as grants and/or loans.
Innovation vouchers are cash grants of up to £5,000 to help small businesses pay for professional advice and knowledge that could help them develop further. This could mean expert advice on IP, tech advice, accessing grants. Businesses claim the vouchers through Innovate UK.
The National Apprenticeship Service
Businesses can access grants to help with the cost of hiring apprentices. Funding amounts depend on factors such as your sector and whether your business pays the apprenticeship levy.
Business grants for young people
Some grants are aimed specifically at young entrepreneurs. The Princes Trust’s Enterprise programme, for example, is for 18-30-year-old business owners to access low-interest start-up loans, mentoring and advice.
Start-up grants for unemployed entrepreneurs
The New Enterprise Allowance is for individuals starting a business who are over 18 and either currently receiving Jobseeker’s Allowance, Universal Credit or Employment or you get Income Support and are a lone parent, long-term sick, or disabled.
If your application and business plan are approved, you will receive a weekly allowance worth up to £1,274 over 26 weeks, as well as a mentor to give you advice.
Funding is one of the biggest challenges faced by most start-ups. Beyond the traditional bank loan, typically associated with high interest rates and strict terms, there is more choice than ever for business owners to consider. How you choose to fund the business will impact future liabilities, opportunities and decisions.
Loans specifically designed for start-up companies, such as the government-backed Start Up Loans Company, typically offer lower interest rates and longer repayment periods than general business loans
But remember, you will be committing to repayments and will need to manage your finances accordingly.
Seed Enterprise Investment Scheme (SEIS)
Investors are bring incentivised through attractive tax reliefs to buy shares in start-ups. Under the scheme, qualifying businesses are able to receive a maximum of £150,000 through SEIS investments.
Enterprise zones are government-led initiatives designed to incentivise investment in specific geographical regions in England through tax breaks and other benefits.
Businesses based in enterprise zones enjoy benefits ranging from discounts of 100% on business rates of up to £275,000 per business over a 5-year period to enhanced capital allowances of up to 100% to support businesses making large investments.
Are business grants taxable?
Cash grants are generally subject to tax since they are a form of business income.
The amount that will be taxable is usually calculated by subtracting allowances and expenses from the total grant.
It will be worth looking at whether your business qualifies for any government schemes that help reduce the costs of paying taxes on business grants.
Small business tax relief
Another consideration for small businesses is tax planning and ensuring you are making full use of all available tax reliefs. These could include:
Business rates relief
Your business may be eligible for a discount on business rates if operating from property with a rateable value of under £15,000.
Under the employment allowance, eligible employers can reduce their annual (secondary) Class 1 National INsurance by up to £4,000. The allowance is used each time you run payroll until the £4,000 has gone or the tax year ends, whichever is sooner.
Research & development tax credit
The R&D tax scheme is designed to provide financial incentives and support for small businesses undertaking and investing in innovation projects. The scope of qualifying R&D projects is broad and can include development of new products, services or ways of working.
Under the scheme, businesses are reimbursed the costs relating to the R&D project through either cash payments or a reduction in corporation tax.
Applying for a business grant
The first stage is to research and identify possible grants and schemes that your business may be eligible for. Look at initial scheme criteria such as sector requirements, size and type of funding you want.
Shortlist potential schemes and reach out on an informal basis to help you better understand if there is a likely ‘fit’.
It’s also important to ascertain what is involved with the application process. You will need to commit to an application, so gauge how much time and resources you will need to commit to the process. Some grants may be smaller and involve a relatively brief and straightforward application, while others – typically those offering larger sums – may involve more in terms of information needed and take longer for a decision to be made.
You can then make an informed decision about which grant(s) you will apply for, and proceed with their application. This is likely to require you to complete an application form and provide specific information about your venture or project, and how the funds, if awarded, would be used. Focus on making your business plan as robust as possible, documenting and evidencing why your venture has the potential and will make full use of the funds.
You should expect to have to make a number It’s rare for a business to be awarded the first grant they apply for, so prepare to have to be resilient and persistent. Learn from each experience, and move on to the next.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute tax, financial or legal advice, nor is it a complete or authoritative statement of the rules and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.
Before acting on any of the information contained herein, expert tax, financial, legal or other advice should be sought.