Government Small Business Grants

Pressure on Business Grants - As recessionary conditions put pressure on scarce public sector finances, successfully obtaining grant aid money is naturally becoming more and more difficult. To make matters worse, companies are finding it harder to obtain small business loan approval. Most start-up small businesses need capital to invest in machinery, buildings, projects and product development, sales and marketing. However, these businesses may be able to receive financial aid from a variety of grant-based organisations including local district councils, central government, European Union, private trusts and Regional Development Agencies. Unlike, business loans and other forms of borrowing, business grants are generally not refunded. Hence, the competition to secure free grants is fierce. Most grants have strict conditions attached, relating to what money can be used for.

Types of Business Grants - The follow types of grants available to small businesses in the UK:-

Matched Grants - these are schemes that dictate that the applicant must match a percentage of the grant, with its own funds. This is designed to ensure a shared commitment to the business objective. These types of business grants are most common to ensure that there is a shared level of risk and reward between the entrepreneur and the grant provider. The size of the grant is linked to a specific budgeted and eligible project. It will not constitute the entire investment required for the company to achieve its objectives.

Small Funds Loan Guarantee Scheme - the small fund loan guarantee scheme (SFLG) is run by the Department for Business, Enterprise and Regulatory Reform (BERR) and the participating lenders. It is operated by specialist banks and other institutions. They provide funding for small businesses, that have failed to secure a small business loan from high street banks. (SFLG) helps to overcome this by providing lenders with a Government guarantee against default in certain circumstances. Typically, these companies must demonstrate a convincing business plan and have tried and failed to obtain finance through the normal channels (simply because they do not have quite enough security). Loan guarantee schemes are usually long-term investments between 2 and 10 years, with an average loan value ranging from Ł10,000 up to Ł250,000. The main feature of this vehicle is that the Government guarantees on average 80% of the loan. The borrower pays a premium, in exchange for the government backed loan guarantee. The borrower also pays a normal interest rate, which is usually arranged between the lender and borrower.

Skills Based Grants - some grants save operating expenditure, by funding external consultants at a discounted rate. Sometimes, the eligibility criteria will be skewed towards minorities or for women starting a small business. Others provide subsidised business training courses to assist employers in improving the education of their individual employees. These types of awards are very helpful, where the internal management skills of a small business are not capable of delivering business results. The main Government subsidised skills and training based grant in England s provided by 'Train to Gain'. This programme provides subsidised training to help improve business efficiency and increase profits, by helping boost employees motivation and confidence. In Scotland, a similar scheme is operated called 'Learndirect', and in Northern Ireland, the Success through Skills Programme provides local skills training.

Geographically Specific Grants - most grants are designed to alleviate specific geographical problems in particular industries. This is common in areas where traditional manufacturing based has declining and the local area has suffered as a result. Coal mining in South Wales and ship building in Scotland are both good examples of assisted areas. Usually there is a need to retrain large numbers of unemployed workers, and revitalise the area for the social good of the community.

Business Investment Grants - the Government has launched a scheme called the Grant of a Business Investment (GBI). This scheme is aimed at providing financial help to any eligible SME's, in England and Wales, who are seeking to invest in deprived areas. In Scotland, a similar scheme operates called the Grant for Regional Selective Assistance (RSA). In Northern Ireland, there is a similar scheme called the Enterprise Northern Ireland Loan Fund. This scheme provides business support and advice, unsecured loans of up to Ł25,000, business advisor help to develop a business plan, gap financing to complete a funding 5 year funding requirement and attractive fixed interest rates. There are also business grants available for small businesses that are based in areas designated by the Regional Development Authorities in England that require economic regeneration, development and employment. To check whether or not your business resides in a postcode designated as an assisted area, the Department for Business, Enterprise and Regulatory Reform.

Research and Development Grants - there are a range of business grants available for small companies seeking to invest in market research into new products. The Government is actively seeking to assist businesses to innovate, create and develop new technologies, to improve Business efficiency and boost exports. To meet this challenge, the Government provides a Research and Development tax credit. This aims to stimulate investment in business innovation, financial incubation, scientific and technological establishments and employment enterprise. There is also a EU based research and development business grant called 'Framework 6', which is offered to organisations working collaboratively with European universities.

How to Apply for a Grant - All grants have eligibility criteria attached to them. This is designed to ensure that the money is invested wisely and meets the objectives of the scheme. To ensure the application is not rejected, applicants must first ensure their small business grant application meets those eligibility criteria. As well as the completed official application forms, most applications will require further information. This may include a detailed explanation of the nature of the project, a budgeted project plan, and an analysis of the benefits to the local area. Depending upon the size and nature of the application, it may be a requirement to be interviewed by a grant officer.

Discussing the nature of the application and the grant eligibility criteria will determine whether any changes need to be made to the application. It is also prudent to create a comprehensive business plan to demonstrate to the grant officer that your application deserves the funding. It is also important to establish any public sector timeframes for the award, because grants are usually based on regular timeframes linked to budgets. Most applications will take several months, as the administrative process in the public sector is notoriously slower than the private sector. Any release of taxpayers monies, are carefully scrutinised to ensure the local community and country as a whole, is receiving value for money from the payment of the business grant.

We hope this short guide will help you quest for a business grant to help your business get started.