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Government grants for small businesses: Grant and loan support to help your business

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Funding your business can be difficult, whether that’s getting it off the ground, or growing a successful enterprise.

A variety of government grants and loans are available to address just this need, and should be investigated by all businesses. Read this article to learn about the financial support that’s available to your business.

Here are the topics that are covered in this article:

What is a grant?

How to get a business grant

Coronavirus-related grants

Regional funding grants

Innovation funding grants

Loans available for businesses

Coronavirus loans

Start Up Loans

UK Export Finance (UKEF)

How to apply for grants and loans

Conclusion on applying for government grants and loans

Put simply, a grant is money given to your business. It’s different from a loan because it doesn’t need to be paid back (unless the grant is claimed fraudulently).

Sound too good to be true?

Well, there are usually conditions attached to the grant in terms of who can apply for it, and then how it should be used.

This is because grants are typically designed to encourage certain behaviour or characteristics within a business, or address an acknowledged business deficiency.

For example, you may need to be a certain kind of business in a particular part of the UK (measured not just by country but county or even city and town).

And the grant may only cover something like paying for broadband for your business, or growing your business provided you do so by taking on new staff recruited from the local area.

The government typically funds grant schemes for UK businesses and asks local authorities and other agencies to both administer them, and decide on those conditions.

Additionally, some institutions might have their own grant schemes.

With the government pledging to help small and medium-sized enterprise (SMEs) through the stages of startup and growth, there is a range of funding for small businesses to take advantage of.

To help businesses survive the coronavirus disruption of 2020, the government has created several grant schemes.

Two in particular are worth noting:

  • The Small Business Grant Fund.
  • The Retail, Hospitality and Leisure Grant Fund.

Small Business Grant Fund

The Small Business Grant Fund offers a one-off £10,000 grant to eligible small businesses.

Your business must be based in a property to get the award. Meanwhile, what’s needed to receive the grant varies depending on which country in the UK your business resides:

  • In England, your business qualifies if you already receive small business rate relief and/or rural rate relief.
  • In Scotland, your business is eligible if get the small business bonus scheme or rural relief.
  • In Wales, your business will need to have a rateable value that’s less than £12,000.
  • While in Northern Ireland, your business should have a net annual value that’s up to £15,000.

Retail, Hospitality and Leisure Grant Fund

The Retail, Hospitality and Leisure Grant Fund, which offers a one-off grant of up to £25,000, applies only to retail, hospitality and leisure businesses.

Eligibility depends on which country you’re in:

  • In England, your business needs to have a rateable value between £15,001 and £51,000 to be eligible.
  • In Scotland, your business needs to have a rateable value between £18,000 and £51,000.
  • In Wales, your business needs to have a rateable value between £12,001 and £51,000.
  • While in Northern Ireland, your business needs to have a rateable value up to £51,000.

For both grants, your local authority should’ve already contacted you if you’re eligible. You might want to check their website if you haven’t received anything.

In particular, they’ll need your up-to-date bank details in order to make the payment, so you might want to get in touch to check.

Local Authority Discretionary Grants Fund

Small and micro businesses can apply for the Local Authority Discretionary Grants Fund. To be eligible for this, you have to not be eligible for the grants mentioned above.

It’s intended to help with fixed property costs for English businesses, so you’ll need to be operating out of a premises.

Grants up to £25,000 are available.

Grants for SMEs focused on research and development

A fourth kind of grant is also available, although only to small and medium-sized business that are driving research and development (R&D). A total of £750m is available to access by businesses.

The scheme is administered by Innovate UK’s grants and loans scheme – you’ll need to opt into this to be eligible.

A variety of grants are available across the UK, administered by councils, academic institutions, and others.

Formerly called the Regional Growth Fund, these grants over varying amounts are conditional upon a series of criteria, including the nature of your business and the amount of time it’s been operating.

To find out which grants your business might be eligible for:

  • Visit the business finance support finder page on the UK government’s website
  • On the page are a series of drop-down menus – start by choosing ‘Type of support’ and selecting ‘Grant’
  • Continue by selecting your business stage, industry, number of employees and region
  • Take a look at the schemes that are available to you.

Here’s some examples drawn from the entries in the list.

Rural SMEs in England, Scotland, Wales and Northern Ireland can group together to get up to £3,500 for broadband.

Businesses in Hertfordshire with five or more full-time employees aiming for growth can get up to £3,000.

In short, diligently searching the list can pay dividends – and remember there might be multiple grants you can apply for.

Businesses that undertake research and innovation as part of their core business – typically science, technology or engineering-based – can apply for grants as well as loans and procurements from Innovate UK, which is part of the UK Research and Innovation (UKRI) body.

Take a look through the list of current opportunities. It can be filtered by industry sector, and is frequently refreshed with new opportunities.

It’s also possible to get tax relief and tax credits for certain kinds of research and development projects.

This is where you’re able to reduce the amount you pay in tax, or get some money back from the government on a regular basis based on your turnover.

Again, these are conditional on your business ticking certain boxes but there are no conditions on what you do with the money you save.

Read more about finding funding for your business


It’s also worth considering loans.

Like grants, they’re offered via a variety of institutions. It’s a mistake to think that banks are the only route for loans.

Often, the deals from these institutions are better value than standard bank loans, and are underwritten by the institutions to remove any barriers.

This makes them available to businesses that may not have a good credit standing (perhaps because they’re new, for example).

The government has created a variety of loan schemes available as part of its support for the coronavirus disruption.

Bounce Back Loan Scheme

The Bounce Back Loan Scheme can be used by small and medium-sized enterprises (SMEs) in the UK and lets you borrow between £2,000 and £50,000. But the maximum amount you can borrow is capped at 25% of your turnover.

The loan is interest-free for the first 12 months, after which 2.5% is applied, and repayments are made across six years.

Coronavirus Business Interruption Loan Scheme

The Coronavirus Business Interruption Loan Scheme is similar but expands the maximum borrowing to £5m, with a £1,000 minimum.

However, only 80% of the balance is underwritten by the government, although you won’t be asked for guarantees if you’re borrowing £250,000 or less.

To be eligible, your business will need to have a turnover of less than £45m.

This government-funded initiative provides loans, mentoring and support for startups or very small, early stage businesses with potentially viable propositions but who are unable to attract investment from high-street banks.

To be eligible for Start Up Loans, there’s a series of criteria you need to meet, including:

  • You have to be based in the UK.
  • You’re over the age of 18.
  • You must be starting a new business or have been trading for less than two years.
  • You can afford to repay the loan that you receive.

You can easily keep any necessary business records with accounting software.

The scheme provides free business planning to ensure applicants are in the best possible position to receive funding.

Every loan application is considered according to the needs of your business and you can borrow up to £25,000. The final loan size will be determined by your business plan.

UK Export Finance says its mission is “ensure that no viable UK export fails for lack of finance or insurance” and as such it aims to help UK exporters in two main ways.

The first is via its Direct Lending Facility, which gives loans to overseas buyers of up to £200m when they purchase capital goods and/or services from UK exporters.

The interest rate is competitive and the loan period can be several years to make it easier to repay.

The second way UK Export Finance helps is similar. Its Buyer Credit Facility provides a guarantee to banks making loans to overseas buyers, again so they can purchase capital goods and/or services from a UK business.

This can be for a loan, or a line of credit.

You might direct an overseas purchaser to the Direct Lending Facility to get orders for your business. With both schemes, your business gets the loan cash up front, as if this were a cash contract in exchange for the goods and/or services.

The borrower then repays the loan. In other words, the money never actually passes through their hands.

UK Export Finance can also help UK exporters to raise tender and contract bonds and access working capital finance, via the Bond Support Scheme, the Export Development Guarantee, and the Export Working Capital Schemes.

To be eligible for export insurance, your business must be based in the UK and the buyer must be overseas.

For those who export goods, services or intangibles, UK Export Finance is definitely worth investigating.

To apply for a grant or a loan, you’ll probably need to demonstrate that you fulfil the criteria or qualifications. This may involve handing over your business plan, or even creating one from scratch.

It might involve providing statements showing the state of your finances for a certain period, and it may require you to create projections of your profit and loss for a period such as the next year or two.

If the grant comes conditional on performing a task – such as growth involving making new hires from the local area – then you’ll need to demonstrate in a written way how you intend to make this happen.

Examples include consulting with your local Job Centre Plus, expanding your payroll and working with relevant employment agencies.

Because of this, applying for grants and loans can be time consuming.

Consulting those who’ve already been through the process can be useful because they might know of any pitfalls or areas to which the grant or loan providers apply particular attention.

Additionally, most grants and loan applications come with instructions or guides – often quite detailed – and you should fully read these first. After all, the institution is considering handing over actual money and fraudulent applications are not uncommon.

You need to ensure you appear as legitimate as possible – the best way of doing this is by demonstrating you’ve applied care and attention.

Many successful businesses owe their success not just to hard work but also to crucial grants and loan schemes when they first started.

It can be a time-consuming practice to look through what’s available and apply but the financial rewards really can make it worth it.

Seeking the advice of other local businesses, such as via a chambers of commerce, can be a good way to get started.

Similarly, searching for advice online or just picking up the phone and making calls can kick start the process.

Often, the institutions behind grants and loans are very happy to discuss what’s required, and to evaluate your business to avoid potential disappointment or wasted effort in applying.

Editor’s note: This article was first published in July 2017 and has been updated for relevance.

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Comments (8)

  • I work as a Treasurer for two local after school/holiday childcare clubs. We were forced to close along with the schools based in from Mar-Sep due to Covid-19. I applied for a grant via our Local Authority Discretionary Grants Fund and we were awarded £10,000 for each club. Basically this covered our loss in income during the period we were closed. It has meant our clubs now have a future and were able to re-open in line with return to school.
    It is possible and not as much work as you think. Just read through the criteria carefully, put together all your supporting documentation/evidence to show your business/circumstances apply and submit. Our local authority were so helpful too throughout the whole process.

    • https://www.sage.com/en-gb/blog/wp-content/themes/sage/dist/images/avatars/custom-avatar.png

      Thanks for sharing your story, Lisa. Great to hear that things are looking positive for the clubs.

      Thanks, Stacey

  • could you please advise which code we can use for the grants in our Sage Account?

    • Hi,

      We can help with how to create nominal codes and amend your Chart of Accounts (COA) if required, however we’re unable to advise which nominal code/s you should use, as this ultimately affects your accounts.

      The nominal code/s you should use depends on which area of your accounts you’d like to affect. For example, Direct Expenses, Overheads.

      I recommend you look at the different Category Types and Category Accounts in the COA to help you establish which nominal codes you’d like to use.

      To access the COA:

      1. Open Sage Accounts > Modules > Nominal codes > Chart of accounts.
      2. Select the layout you’re using > Edit.
      3. From here, you can view the different Category Types, for example, Purchases, Overheads and which nominal codes are included in the relevant category types.

      If required, to create a new nominal code, select Modules > Nominal codes. From here, you can either select New to go through the New Nominal Wizard.

      You can find more info on the COA here http://1sa.ge/GeFc50BBi8n

      You should contact your accountant for further advice if you’re still unsure which nominal code/s to use and/or which areas of your accounts should be affected.

      Regards,

      Paul
      Sage UKI

  • we are a small business who have received nothing from the Goverment in march april may june when lockdown came are business just stop please help me to know what and if i am entitled to any grants

    • https://www.sage.com/en-gb/blog/wp-content/themes/sage/dist/images/avatars/custom-avatar.png

      Hi Keith,

      You can find more details on the coronavirus support that’s available to businesses in this Sage Advice article: https://www.sage.com/en-gb/blog/coronavirus-financial-support-business/

      It’s also worth taking a look at the Gov.uk website for information on grants that your business may be entitled to.

      Thanks, Stacey

  • A complete waste of time, no right considerations to support SMEs. These options are for those businesses who are already successful and they do not really need funding.

  • dont use these people as they dont care about you and not even interested in your business.