Grants and Public Support

Raising business financeGrants are generally given to assist with business development and will therefore be linked to a specific area of activity such as training, new product development or investment in plant and equipment.

CLICK HERE to access grants to support Access To Finance projects.

A grant is defined as a ‘sum of money given to an individual or business for a specific project or purpose’. While grants may not cover all of the total costs of the project or purpose, the advantages of this type of funding are that as long as you keep to any conditions attached to it you will not have to repay it as you would with a loan, nor will you have to give up any shares in your business, as you would with an equity investor.

In addition to outright grants, other publically supported schemes exist which can provide ‘soft loans’, quasi or actual venture capital, or guarantees for bank borrowings.

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The Practical Issues

In practice obtaining grants can be a long, time consuming and frustrating process, with no guarantee of success that involves:

Finding out what grants are available for your business. This can be difficult as there are a wide variety of grants available across the country with many thousands of grants and financial programmes available to UK organisations accordinge below); that are funded by a wide range of organisations including:

  • local authorities
  • Regional Development Agencies
  • central government
  • European Union bodies; as well as
  • non-government organisations such as the Prince’s Trust; and
  • quangos such as the National Endowment for Science Technology and the Arts (NESTA) or the Carbon Trust

Each of these bodies has its own agenda (and application process) which then determines both the the use to which the funds are to be put, as well as the criteria you have to meet in order to apply, which can include:

  • the size of your business, some may only be available for small or medium-sized businesses (SMEs)
  • the industry you are in, some may be designed to help a specific industry, or a general grants may exclude businesses in some specific sectors; and
  • your location, where for example many European union grants are only available in specified geographical areas requiring economic regeneration.

Searches are commercially available from specialist advisors which can quickly and effectively establish what schems your business may be eligible for.

Points to remember if considering applying for a grant include:

1 Arrange to apply before you start the project or incur the expenditure. Most grants are not retrospective and you have to apply for your proposed project in advance. This can result in delays in getting your project underway if you have to put it on hold while you go through the grant process.

2 Arrange the other cash required, as very few grants will provide 100% of the cash required for a project. You will therefore need to both arrange the matching funding to provide the balance, and be able to prove to the grant provider that this is in place. This matching funding can be cash introduced into the business by the owner or a new investor, come from the company’s own cash reserves, or be money that has been borrowed for the purpose.

For some smaller grants and support you may be allowed to count the cost of your time that is contributed towards the project as part of the matching funding.

3 Find out if you can obtain cash prior to expenditure. Many grants provide repayment to you of part of an expense or investment that you have to make and cannot be retrospective.

Remember that even once you’ve been awarded a grant offer, you still actually have to be paid it. This payment might be a regular intervals throughout a project or may be in arrears once you have submitted proof of the expenditure. You therefore will need to look at your project’s cashflows to ensure that you are able to finance the project until the grant cash actually comes through to you.

4 Find out when the application has to be made, some funds are only available for part of the year and others may have deadlines which have to be hit. Remember that most grant funding bodies will be bureaucratic institutions that are managed on the basis of paperwork, which will have to be in on time and in triplicate.

5 Allow sufficient time to complete the application process which you will generally find includes attempting to estimate how many jobs will be created, or staff helped to obtain NVQs or other qualifications, as a significant part of both the form and the selection criteria.

Approval of your application and payment of the funds may then take some time. A locally administered grant should take no more than a few weeks, however an application for national funds may take months, while applications for European funding can take anything up to a year.

Remember that many grants are either run as competitions or may in practice be competitive, as the number of businesses are all applying for a limited pot of funding. You therefore cannot rely on automatically getting any grant and you need to consider whether your project is viable if the grant doesn’t come through.

Almost all grants will come with strict terms and conditions which will include a requirement to provide extensive information as to the impact of the grants which can for example, require you to provide details of numbers of employees and qualifications gained as a result of the grants. Afterwards the danger with grants is that if you breach the conditions they are usually repayable immediately although at least no interest is charged.

One danger that can arise from this is where in order to get a grant you have to commit your business to meet specific criteria which may cause a subsequent problem.

For example, an electronics business MBO had obtained a significant grant which specified the number of jobs this grant had to have secured. When the industry had a downturn and its competitors laid off staff to reduce costs, the company was unable to do so as this would immediately trigger repayment of the grant in full. As a result, the company staggered on without reducing its cost base until eventually it failed and all the jobs were lost.

What do Grants Cover?

Particularly given current levels of cuts and change it is difficult to give a definative answer as to what grant support may be available, however grants are made available by funding bodies in order to help them achieve their objectives and at present in the UK break down into a number of main areas as follows (some of which obviously overlap):

  • Training across many areas, most notably in IT skills or any training which would lead to a qualification such as an NVQ
  • Research and development, together with the implementation of innovation and then taking products to market
  • Economic regeneration, although the picture here is uncertain
  • Ecological improvements and energy improvement projects.
  • Exports, where support is available for example to attend overseas trade fairs and source local agents
  • Employment of young people
  • New business start-ups, particularly amongst young unemployed people.

Accessing Grants and Other Publically Supported Funding

As noted above, establishing what grants are available is the first step which is best done using the services of a specialist grants advisor. These will then normally also be best placed to advise you on how to apply for a grant and  will often work on a contingency basis to help you obtain funds.

Of course the information contained in an article like this can never be a full statement of the legal position as the relevant laws are complex and liable to change. This article can only therefore be a general guide as to the issues involved and as these can have serious implications you should always seek appropriate professional advice on your own particular circumstances before taking any action.

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