What are business grants?

When a business is seeking to access finance, one of the first places they tend to look is grants finance.

In this article we’ll explain what business grants are, where you can find them, and offer some tips for how you can apply.

What is a business grant?

Business grants are payments provided by either the Government or a private organisation for a specific purpose, such as training, expansion, or research & development.

Where they differ from any other form of finance is that you don't have to pay it back.

Nor do you have to give away a share of your business in exchange.

There are many business grants available across the UK and some business sectors - such as energy, export and innovation - are particularly active and offer a range of options.

Grants can be awarded for up to hundreds of thousands of pounds, but most grant awards are typically for up to a few thousand pounds so in many instances, grants will need to be supplemented by other forms of finance.

Examples of business grants

Grants are customarily designed to support a specific project or objective, such as encouraging businesses to adopt environmentally friendly practices, improving digital connectivity, or backing female entrepreneurs.

As such, there is a wide variety of grants available, each focused on different aspects of a business.

• Green grants focus on specific objectives like enhancing sustainability.
• Job creation grants are aimed at facilitating business expansion, thus creating more employment opportunities.
• Direct grants are those that provide a direct cash sum. However, this money may need to be allocated to a particular purpose or project.
• Resource and training grants offer resources like training, mentorship, and workshops, which can be crucial for your business's growth in addition to the funding
• While not technically grants, tax relief schemes can provide additional funding.

It's important to note that some grants are industry and location-specific.

You can explore more funding opportunities for small businesses by checking the gov.uk grants directory.

Filter the results by region to find the grants available in your local area.

How are business grants paid?

It depends on the specific grant you’re applying for. You might:

• receive your grant as a single lump sum upfront
• be reimbursed after spending your own money
• need to match the value of your grant before you receive it.

Business grants usually have very specific eligibility criteria.

These can vary, but often take account of things such as:

• the size of your business
• where you're based
• the sector you're in
• what you'll use the grant money for.

What are the advantages of a business grant?

Depending on the specific terms of the grant, there are a number of benefits to using grant finance such as:

• No repayment - As the money doesn’t need to be repaid, a business receiving a grant can put the capital they’d need to repay a business loan to better use, such as growth.
• Retained equity - Unlike Equity finance, when you receive a grant you retain 100% control of your business and therefore don’t dilute your ownership stake in your business.
• Supply - There are lots of different options available for businesses to apply for.
• Synergy - Business grants often combine well with other forms of finance such as business loans or equity finance, allowing a business to raise capital without the drawbacks of raising it from a single source such as having to give up a large portion of your business equity or managing large monthly repayments.
• Accessible information - Accessing information regarding grants, such as who offers them, how to apply, when they're available, and where to find them is crucial in your search for the right fit. You'll find a wealth of data and resources readily accessible to assist you in your quest for grant funding.
• Waterfall effect - Securing your first grant award can often increase your chances of receiving additional awards. The initial award can be seen as an endorsement of your business by other grant awarding bodies. This endorsement can enhance your credibility, making grant providers more likely to view you as a trustworthy candidate for their own funding opportunities.

What are the disadvantages of business grants

As with all types of finance, there can be a number of disadvantages to focusing on obtaining grants for your business such as:

• Competition - Grants are often one of the most popular forms of finance for a business to try and obtain, this naturally leads to a lot of competition and often fewer than 10% of businesses that apply for a grant are successful.
• Specific requirements - Grants tend to have very specific eligibility requirements attached to them. These could be around the physical location of the business, the sector it operates in, or even the age, gender, or ethnicity of the founder.
• Time consuming - Like most types of funding, applying for grants can be time consuming and can quickly impact the day to day running of the business. It might be worth considering hiring a grant writing company to share the load.
• Cash flow impact - Sometimes grants will be awarded retroactively meaning you need to spend the money out of your own pocket and then claim back the money via the grant. This can cause cash flow issues for a business and require them to seek additional funding.
• Match funding - With some grants there is a condition put in place by the awarding body that requires you to contribute a certain amount of money to whatever you plan to use the grant for. In essence, you are ‘matching’ the money you will receive from the grant with additional capital you either already have in your business or will obtain from another source such as a bank loan.
• One-off - Grants are typically one-off awards meaning they can be an inconsistent source of funding and a business cannot rely on them for long-term financial support.

Where can I find a business grant?

Often the best place to begin your search for a business grant is online.

The Government’s business finance finder is a good place to look for grant funding that suits your business.

It’s also a good idea to check with your Local Growth Hub for grants available in your specific area.

A sometimes-overlooked source of grant funding are small business and industry associations.

These bodies may either run their own grant awards process or have information about grants available elsewhere that they can pass along to their members.

Finally, your accountant may also be aware of some grant funding and may have had other clients for whom they have supported applications.

Business grant eligibility criteria

Business grants typically have strict eligibility criteria.

These concern things such as:

• the region you’re based in
• the type of business you run
• whether the provider has an area of focus which your business could help with.

Application processes can be long and time-consuming, and there is no one-size-fits-all approach.

It all depends on the rules and conditions of each individual grant programme.

As a result, it’s always a good idea to speak to the provider to find out what’s involved in the process and whether you’re eligible.

Some business grants are provided in the form of finance, while others offer free equipment or discounts to aid your business’ development.

Whatever form your grant takes, there will be conditions attached so it’s important to make sure you fully understand these.

Tips for applying for a small business grant

Navigating the application process for business grants, whether they're for small businesses or start-ups, can seem daunting.

However, there are several key steps you can take to increase your chances of securing funding.

1. Research thoroughly - understanding what the grant provider is seeking in applicants is crucial. Tailoring your application based on these insights not only increases your chance of success but also saves time by helping you avoid applying for unsuitable grants. It’s a good idea to contact the awarding body before applying to understand better what a successful application will need to include.
2. Apply early - The amount of funds available in a grant pool may dwindle over time. Therefore, submitting your application early could enhance your prospects of receiving the grant.
3. Be detailed and specific - Clearly outline your business operations, how you fulfil the eligibility criteria, and your plans for the grant money. Detailing your objectives and expected outcomes will make your application more compelling.
4. Clarity is king - Avoid using technical jargon or complex language unless absolutely necessary. Your proposal should be straightforward and easy to comprehend
5. Tick all the boxes - A comprehensive business plan can significantly strengthen your application. It highlights why your business is deserving of the grant and in many cases, it might even be a mandatory part of the application.
6. Meet the deadline - Ensure you don't lose out on an opportunity because of a missed deadline. Make a schedule noting all the important dates, from submission deadlines to further stages in the process.

Should I hire a grant bid writer?

If your schedule doesn't permit you to monitor upcoming grants or explore current opportunities, engaging a grant consultant can be a viable solution.

Grant bid writers are well-versed in the application process and can efficiently manage applications on your behalf.

They also have the expertise to liaise with awarding organisations, which can be particularly useful when dealing with larger bodies that may be challenging to reach.

While hiring a grant bid writer might entail significant cost, it could prove to be a worthwhile investment if their knowledge and experience help secure the necessary funding for your project.

However, bear in mind that some awarding entities do not accept applications made through consulting firms.