Starting a business in the UK can be a very emotional experience filled with excitement, worry, anticipation, and more. There are a lot of moving parts and unknowns, which makes every business unique.
But one thing that nearly every business has in common is that you need money to cover your start-up costs. As the well-known saying goes, you need to spend money to make money. But… where does that initial money come from?
There are many finance options for new businesses. Specifically, there are many grants for small business startups UK entrepreneurs can apply for, offering businesses like yours the initial capital that you need to get started. And the best news is that because they’re grants (and not loans!), you don’t have to pay this money back.
In this guide, we’ll explore the types of grants on offer, where to find them, who is eligible for them, and give you top tips to make your application stand out.
Understanding business grants
Grants are a financial gift aimed at helping businesses grow and innovate without the burden of debt. They’re designed to act as a helping hand to get new businesses going, with the idea that you’ll boost the UK and local economies down the line. For SMEs, statistically proven to struggle more with credit constraints, grants are a lifeline (Rostamkalaei & Freel, 2016).
There are two main categories of grants.
Direct grants
These provide a set amount to cover specified costs (such as equipment costs, staff training, or property). Most government grants will fall into this category.
Matched funding grants
These are grants that will only give you funding if you contribute a certain amount yourself. For example, if a grant offers £5,000, you might need to invest an additional £5,000 to match the grant. This reduces risk for the provider and is often used on Innovate UK grants. It’s basically a way of showing that you’re in it together.
It’s also worth noting that although most grants are cash-based, there are also other types of grants available.
This includes grants in kind, which offer resources like training, mentorship, or equipment instead of cash. There are also discounts and voucher grants, where businesses can access services and products at a discounted rate.
The different types of grants for small business startups
There are many different types of grants on offer in the UK, meaning that you should be able to find one that fits your needs exactly. This includes:
Small business and startup grants
These grants are designed for small businesses and new ventures. These grants can be tailored to specific industries and sectors or in specific regions.
Grants for young entrepreneurs
If you’re aged 18 to 30, you can access grants that are aimed at young adults, such as The King’s Trust.
Employment grants
If your business is set to create jobs or you will be able to take on apprentices, you can often apply for employment grants to get your business running.
Innovation and R&D grants
Funding to support research, innovation, and development, often to boost productivity or technological advancement. Businesses were able to expand their workforce by 36% to 50%, thanks to this type of grant (Testa et al., 2019).
Regional and sector-specific grants
This provides grants to specific locations and regions to help boost local economies.
Export grants
If your business is trading overseas, these grants help you expand internationally and can help with trading, marketing, and exporting costs.
Now let’s move on to how you can find the right grant for your business.
How to find the right business grant for you
One of the best places to find business grants is through the GOV.UK Business Finance Support Finder, which gives you a trusted list of every scheme and grant that is currently available. On the right-hand side, you can filter the list to show you only specific results (i.e. grants!) based on your criteria.
Let’s go through a real example, using Jenny. Jenny is a 24-year-old home baker who is trying to start up a baking delivery box in the East Midlands. She wants to create new treats each month, then ship them out for people to try and discover different types of bakes.
Using this tool, Jenny filters the results:
- First, she selects only grants to appear under the type of support menu.
- Then she clicks ‘Not yet trading’ under the business stage.
- She clicks ‘Agriculture and food’ under industry.
- And finally, clicks ‘East Midlands’ under the region.
This narrows down that big list to 6 options that are more tailored to her needs, which she can click on and find out more information on each one. By doing this, Jenny has found an investment grant in her area that she thinks will be able to help her with the start-up costs for her baked subscription boxes.
However, this isn’t the only place to find grants. To find alternative options, Jenny can also turn to:
- Local growth hubs: Always check with your local Growth Hub for grants available specifically in your area.
- Local authority websites: Councils and devolved governments frequently offer grants, particularly in regions targeted for economic growth.
- Industry-specific organisations: Small businesses and industry associations can be a sometimes-overlooked source. They may either manage their own grant award processes or provide valuable information about grants available elsewhere to their members.
- Universities: Many universities partner with businesses to offer innovation grants, particularly within science and technology fields.
- Accountants: Your accountant may also be aware of relevant grant funding and could have experience supporting applications for other clients.
It’s also worth noting that some grants have very small application windows. So it might be worth checking out previous or expired grants to see if they will become available again.
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Make sure you’re eligible before you apply
Once you’ve found a suitable grant, you need to carefully read through the requirements to see if you’re eligible. Most grants are usually assessed based on factors like your business size, sector, location, and the purpose of funding (i.e. for research and development, for exporting or job creation).
If the grant is a matched funding grant, you will also need to prove that you have a way of funding your share.
Things to do before grant application
Grants are highly competitive. So it’s important that you don’t rush through the application process and give yourself ample time to make a great application.
Do your research first
Before you even begin, dedicate time to understanding the specific eligibility criteria, application deadlines, and required documentation for each grant. Ensure the grant’s objectives align perfectly with your business goals and funding needs.
For example, Srhoj et al. (2019) explained that for some businesses, receiving at least 10% of last year’s profits can determine the grant’s success. So, always double-check the fine print!
Talk to the grant body
Reaching out to the grant-awarding body directly can provide invaluable insights into their expectations, priorities, and whether your business stands a strong chance of a successful application. It’s an excellent way to clarify any ambiguities and demonstrate proactive engagement.
Build a strong business case
Think carefully about what makes your business stand out – and why you should be given the grant over others. Remember to tie in your business goals to how closely they relate to the grant (such as driving growth in your area).
Prepare your documents
To support your grant application, you may be asked to prepare documents such as business plans and proof of match funding.
Submit a clear application
Read all instructions carefully and give clear, concise answers to all the questions.
Don’t miss the deadline
Many grants operate with limited funding pools. Submitting your application early can significantly improve your prospects, as there’s often more funding available and less competition at the scheme’s launch. Always note all important dates, from submission deadlines to potential follow-up stages.
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There’s always plan B for funding
Business grants are highly competitive. But not being accepted onto one doesn’t mean its the end for your business – there are plenty of other ways to finance and cover your start-up costs.
These options include self-funding, where the funds for your business come from you. This is a common option – as 44% of business owners are using their own savings to fund their business. It’s a risky one, as you’re putting your own money to the test. But it also means no applications or having to prove your plan to others.
You can also opt for personal or business loans to borrow for your start up costs. You will need to have a business bank account for a business loan – which you can find out more information about here.
Finally, you could opt for equity funding. This is where you sell a share of your business in return for funding. Instead of borrowing money, you bring on investors who become part-owners of your company. To do this, you will need to start a limited company and be able to assign shares. Find out more in this guide.
Granting your UK start up dreams
As we’ve explored, Grants For Small Business Startups UK are a great way to provide that much-needed funding to get your business off the ground. No matter your business type or area, there’s usually something available that will match your needs exactly.
However, grants are highly competitive – and it’s not the end of your business if you don’t get accepted into one straight away. There are more grants that you can apply to over the years, and other financing options are available to help out when you need it.
No matter how you fund your business, we’re here to help you with the best tips, advice, and tools you need at Business4Beginners.
