Business Grants

Business grants are a common form of business finance offered by the Government or private organisations. Unlike other forms of finance, grants do not need to be repaid and neither do recipients have to give up a share of their business in exchange for the funding. 

How does a business grant work?

Grants are usually available to businesses in specific sectors or locations. They are designed to support a particular business project or objective, such as training, business expansion, or research and development.

The amount of funding available is grant dependent. Business grants can be awarded for up to hundreds of thousands of pounds, but most are for a few thousand pounds.

They often have strict eligibility criteria and extended application processes, which take into account:

• the size of your business
• the location of your business
• the sector or industry your business is in
• and what you will use the grant money for.

Most grant awards tend to be on the smaller side, so they may need to be supplemented with additional forms of finance. It’s important to do your research and understand the rules and conditions of the grant programmes you’re interested in.

What are the benefits?

There are a number of possible advantages for smaller businesses that access business grants:

• no cost: your business does not need to pay back any funding received. However, for larger grants, typically over £50k, matched funding up to 50% may be required
• retain equity: you retain 100% control of your business, you do not need to give away a share or any equity in the business in exchange for the funding
• supply: a large number of sources, both private and public sector, offer grants to businesses
• synergy: business grants often combine well with other forms of finance, such as business loans or equity finance
• waterfall effect: securing your first grant award can be seen as an endorsement of your business and often increase your chances of receiving additional grant awards.

What are the potential drawbacks?

Business grants can be helpful for new business owners. However, this funding does come with its own set of drawbacks:

• huge demand: grants are a popular form of finance for businesses, this leads to high levels of competition 
• specific eligibility criteria: grants tend to have very specific eligibility requirements that businesses need to meet
• time consuming applications: applying for grants can be time consuming, with no guarantees you’ll receive the funding
• cash flow impact: sometimes grants will be awarded retrospectively so a business will need to first spend the money and then claim it back via the grant 
• ad-hoc: grants are typically single awards and can therefore be an inconsistent source of funding for a business
• match-funding: for certain grants, typically those over £50k, businesses may be required to "match fund", where you use additional capital to match the amount provided by the grant 
• subsidy/state aid: certain grants from public bodies will count as a subsidy or state aid to the recipient. It's important that you research and understand what the impact of that might be for you in terms of potential availability of other grants or funding. 

How do I get a business grant?

The process of applying for business grants, whether for small businesses or start-ups, can often feel challenging. Here are a few tips to guide your application effectively.

• research the grant provider: understand what the grant provider is looking for and tailor your application based on these insights. It’s also a good idea to contact the awarding body before applying, to better understand what a successful application will need to include
• apply as soon as possible: the amount of funds available may reduce over time as grants are awarded. By submitting your application early you will maximise your chances of acceptance
• meet all the criteria: make sure your application demonstrates how your business meets the eligibility criteria for the grant. Avoid using technical jargon or complex language
• remember the deadline: it might sound simple, but don’t lose out on an opportunity because of a missed deadline.

A good place to begin your search for a business grant online is via the Government’s grant directory or Innovate UK's website.