From local to national government, all the way to the European Union, many bodies wish to encourage small businesses – and one of the most common ways they do this is through grants. And yet many small businesses never think about using this form of finance, despite it being a great way of getting cheap money.
During a downturn, grants become even more important as they don’t depend on banks – and with a credit crunch happening, banks may be reluctant to lend. So how can your business benefit from grants?
What kinds of grants are available?
The main groups who award grants are the government, the European Union, the regional development agencies, local authorities and county enterprise agencies. Some charities and voluntary bodies also provide grants where a business matches their special interest sector – for example, The Prince’s Trust makes available small grants to young people starting in business.
Business Link maintains a database of currently-available grants which is free to search, and this can be a useful starting point. Local chambers of commerce can also help find the right sort of grant for you.
Grants usually take the form of either a set amount which is put into your business for a specific purpose, or a low- or no-interest loan. This makes them a very effective way of getting money into your business.
Typical purposes which you can get grants for are setting up in specific areas – usually those in need of economic regeneration – training, employing “New Deal” candidates, or for certain kinds of research and innovation.
How do I know if I’m eligible?
There are usually several criteria applied to eligibility. Location is often a factor: if you have set up or intend to set up in an area which is undergoing economic regeneration, there are often a wide range of grants available to you. Size may be a factor, as most grants – but not all – are oriented towards businesses of under 250 employees. And industry sector may be as relevant, as government, the EU and local authorities often wish to encourage particular sectors – especially technology and manufacturing.
However, the biggest factor is likely to be the purpose of the grant. Bodies that give out grants tend to want to see specific, measurable results for them, for example increasing employment or investment in machinery, which means they are strict about the purpose.
It is rare that a grant application takes less than a few months to be approved – so they don’t make a good source of emergency finance!
“How we got a grant”
When Richard Davis was looking for funding for his innovative start-up business, Virtual Gym TV, he talked to his local Enterprise Agency in the Medway area of Kent. His local council, Medway, runs a loan scheme called “Partners for Growth” aimed at new businesses and those relocating to Medway, which offers an interest-free loan, usually of between £10,000-15,000.
According to Richard, in addition to informing him about the scheme, the Enterprise Agency also helped with the application – and the entire process took around three months. “Medway Council was a lot quicker to deal with than some other sources of funding,” he added.
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