What is a Government Grant?
A government grant is essentially an incentive package made available by various government bodies and organisations to individuals as well as businesses. Government grants (barring the finance grants) are usually non-repayable. Depending upon the nature of the grant body and the grant objective, these grants can come in a variety of sizes and formats. As far as small businesses are concerned, such grants range from £1,000 to £500,000. Some of the bigger and more prized grants can go even higher.Why Are Grants Given to SMEs?
Government grants have been there for a long, long time. The names and forms they have taken may have changed over time – from business subsidies to business support – but the objectives haven’t. If you were to analyse government grants across business sectors and districts, two things become very clear:- Most government grants have a singular objective – to keep the economy growing. This objective takes many avatars such as employment generation, sectoral development, regional development and so on. Grants that have these objectives are more or less permanent fixtures.
- Other grants aim to follow, aid and complement ongoing policies of the government. Such grants typically reflect the incumbent government’s views in regard with trade, environment, social welfare, technology etc.
- Boost economy through regional and local development
- Generate employment by supporting businesses
- Create an economic environment that encourages innovation, entrepreneurship and ‘home-grown’ research
Why SMEs Should Take Government Grants More Seriously
Even though government grants are incredibly appealing, very few SMEs actually realise the potential of such grants. Here are some features of government grants that SMEs can’t afford to overlook:Government Grants Are Diverse
Very specific grants are available across all business sectors. This allows SMEs to compete more fairly for similar grants.Grants Are More Than Just Money
As we will discuss in the next part of this post, government grants offer much more than just money.Winning a Grant Validates Your Business Idea
A large number of SMEs are stuck in the validation loop that stops them from expanding or trading more confidently. Inadequate funding makes matters even worse. A grant can be a good way to turn the corner in such times and receive external recognition and validation.Government Grants: Shortcomings & Drawbacks
While the features associated with government grants are certainly attractive, there exist shortcomings and drawbacks you should be aware of:The Competition Is Fierce
The competition for government grants is fierce to say the least. Since young businesses, start-ups and established businesses all tend to spill over into the space that’s reserved for SMEs, the competition can become entirely off-putting.It Can Take Months Before You See the Money
Applying for a government grant isn’t always the smoothest of processes. It can take many months for the assessment process to conclude, making grants irrelevant for businesses that require urgent funding.Grants Can Never Replace External Funding
Given their limitations in size and scope, government grants cannot replace external, third-party funding channels – not in the long run, anyway.Types of Government Grants for UK SMEs
In our guide to start-up funding, we have already discussed the various types of government grants. In the context of SMEs, these types remain more or less the same.Direct Grants
A direct grant is a project-specific and objective-driven cash reward to businesses that meet the criteria. This is what most businesses think of when they think of a government grant. Despite being the most popular and sought-after type, these grants come with a host of limitations and riders. As things stand today, direct grants focus more on young SMEs (trading for 5 years or less) in economically disadvantaged regions and districts. Furthermore, the grant amount is usually on the lower side. Given these facts, one would be forgiven to think that direct grants are good for encouraging businesses, but not necessarily supporting them.- Direct Grants Are Not Free Money!
- Most Direct Grants Are Project-Based.
- Example
Finance Grants
If you are looking for a well-meaning financing support for your SME, finance grants should always be the focus of your search. A finance grant combines the features of grants and loans. Also known as ‘soft loans’, such grants are an excellent way of raising a significant sum of money for SMEs. Typically, the loan amount can go from as low as £5,000 to as high as £250,000. Finance grants are usually available around the year. Unlike direct grants, however, finance grants are repayable. The terms of repayment are subsidised through public funding. So, you may either get a loan that’s fully free of interest, or you may get a lenient repayment schedule with generous repayment holiday months/years.- Soft Loans Are Not Always Project-Based
- The Qualification Criteria Can Be Stringent
- The Grant Amounts Are Flexible
- Example
Tax Relief Schemes
Tax Relief Schemes are indirect grants offered to qualifying SMEs. There are little to no upfront benefits to such schemes. In the long run, however, these tax savings can be very attractive. Here are some common and ongoing tax relief schemes that you can focus on: Tax Relief Schemes for SMEs 1. Employment Allowance Most businesses are required to contribute to the National Insurance every year. By securing the Employment Allowance, your business can save up to £3,000 on these contributions. 2. SME Business Rates Relief All properties owned by businesses are charged business rates by local councils. If your business holds one property (valued at £12,000 or less), you can apply for 100% Small Business Rates Relief. For businesses holding two or more properties, it’s still possible to get proportionately lower relief. 3. Corporation Tax Reliefs- Capital Allowances let SMEs claim tax reliefs against the purchase of business assets.
- R&D Reliefs are meant to encourage R&D spending.
- Creative Industry Tax Reliefs provide special tax reliefs to ‘creative’ industries such as arts, film, theatre, music and digital media.
- The Patent Box is one of the most exciting tax relief schemes out there. This scheme allows inventors and businesses to claim tax reliefs against profits made by the use or licensing of their patents.
- There are many other Corporation Tax Relief Schemes tailored for the need of SMEs. You can refer to this page to learn more.
SME Grant Finder: How to Find Government Grants
Searching through available government grants is no longer a dreadful or time-consuming task. Just head over to the Business Finance and Support page and filter through the available options. This page allows you to zero in on government grants based on your location, business type, size and turnover.5 Steps SMEs Need to Take to Win Grants
1. Applying Early
Applying early gives you an important edge over competitors. To be able to do this, you need to be aware grant announcements.2. Preparing a Detailed Business Plan
It doesn’t matter what sort of loan, support or grant you are after – you will always need a business plan that paints a clear picture of the present state of your business and your future objectives. A good, in-depth business plan that answers questions even before they are asked enormously improves your chances of winning government grants.3. Understanding the Grant, the Grant Body and the Grant Objectives
If your grant application is rejected, it’s very much likely that the fault lies neither with your business nor the grant – it lies with the incompatibility of your objectives with those of the grant body. The best way to avoid this is to apply for grants that share objectives with your business.4. Having Professionals on Board
If you don’t have prior experience in applying for grants, it’s always a good idea to hire grant experts and consultants.5. Preparing a ‘Winning’ Grant Application
A generic, off-the-bat grant application is never going to win you a grant. Preparing a grant application that lets the grant body know how you share in their objectives is the key.We Help SMEs Grow!
Government grants offer a host of opportunities for SMEs to raise the much-needed funding. It is, however, never a good idea to rely heavily on government grants. The timelines are unpredictable, the amounts are usually lower than what you need and you will, in most cases, need to raise external funding anyway. But it’s not all bad news – there are easier way to fund your business. Commercial Finance Network – a leading whole of market broker – has helped many SMEs across the UK secure fast and low-interest funding. To know more about our industry-leading finance services, you can visit this page. Check your eligibility for a low-interest business loan and other finance products by requesting a free quote here.If you are planning a property purchase or need funding for a business or investment project, get in touch and we will talk through what fits your situation.
Commercial Finance Network is a whole-of-market FCA authorised commercial finance broker working with property investors, developers and businesses across the UK and internationally.
Commercial Finance Network is directly authorised and regulated by the Financial Conduct Authority.
Your property may be repossessed if you do not keep up repayments on a loan secured against it. Commercial and business-purpose lending secured against investment property is not regulated by the Financial Conduct Authority.
Call: +44 1494 622 111
Email: info@cfnuk.com
