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What types of small business grants are available?

Business startup grants are hard to come by; here’s an overview of the new business grants available for small businesses and entrepreneurs…

The simple answer is yes, but getting your hands on it can be a complicated and rather stressful process. There are countless schemes, each with their own set of criteria, which you can apply for when you’re on the verge of starting a business.

Start-up funding is out there to be claimed, yet every year we receive stories of piles of cash sitting in accounts and not being invested. It’s not because you don’t need the cash, but it’s because navigating through the grants jungle can leave you wishing you were still employed.

Types of business support

All publicly funded schemes are designed to encourage new and growing businesses, to bring wealth and ultimately create jobs. To help achieve this the government makes available a portion of taxpayers’ money to help and encourage enterprise through small business grants.

This cash gets distributed through a variety of ministries, departments, agencies and quangos on a national and local basis. Most businesses are eligible at any one time to apply for a number of different business start-up grants and support schemes which are distributed in a wide variety of forms.

Government grant resource the ‘business finance support finder‘ is a great tool to help those starting a business find relevant funding to suit their needs and you are able to customise your search by your business location, size, and type of business activity.

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The three main sources of grants for start-ups and small businesses come from:

  1. The government
  2. The European Union
  3. The local authority

Government grants for small businesses 

Government grants for small businesses are available from the UK government, the Scottish Parliament, and the Welsh and Northern Ireland Assemblies. There are over 100 different government bodies which will offer different forms of funding based on specific criteria and objectives.  There are often over 3,000 grant schemes running for UK start-ups at any one time, so it can be a confusing process for business owners to decide which organisations to contact.

Here are the main government organisations who offer grants to small businesses:

European Union grants for small businesses 

Despite Brexit, UK start-ups and small businesses can still apply for and receive funding from the European Commission – until the UK officially leaves the EU. The EU, via the European Commission, administers a number of schemes through structural funds made up of:

This EU “Access to finance” tool should help you to see if your start-up qualifies for any EU-backed funding.

Local authority business grants

As well government and European funding, a number of locally-based organisations can also provide your start-up with capital.

Specifically to support and encourage enterprise at a local level, there are currently 38 Local Enterprise Partnerships (LEPs) across England.

Similarly, the government-backed £3.2bn Regional Growth Fund supports projects and programmes that are already in the process of raising private investment.

Type of government business grants available

Direct grant

This is a cash award, which is usually given out for activities such as training, employment, export development, recruitment and capital investment projects. With a direct grant most schemes usually require the company involved to put up around 50% of the cost.

The government’s ‘business finance support finder’ directory has over 300 direct grants agencies listed such as UK business “innovation” organisation the Technology Strategy Board. The directory also features various local grants providers which are facilitated by the government’s £3.2bn Regional Growth Fund, such as Catalyst for Growth which has direct grants of £5,000 to £500,000 available for chemical start-ups launching in the North West of England.

Soft loan

A soft loan is a special type of grant where the terms and conditions of repayment are more generous (or softer) than they would be under normal financial circumstances. So, for example, the interest rates may be less, or there may be no interest to pay at all, and the repayment terms could also be for a longer period.

There are hundreds of organisations that offer soft loans and guarantees but the most notable is government-funded scheme Start Up Loans which offers new businesses loans of up to £25,000 for 6% interest with a 12 month repayment “holiday”.

To date it has helped to fund thousands of start-ups with over £250m invested; see if you are eligible on the Start Up Loans website here.

If you’re starting a social enterprise or charity there are organisations such as başlatıyorsanız, the investment arm of the Big Issue, which has soft loans from £50,000 to £1m available for positive impact, socially-driven entrepreneurs and also operates ‘participation loans’ where repayment is linked to future performance of the enterprise. A Startups member also suggests taking a look at https://unltd.org.uk for providing grants of up to £5k for social enterprises.

For young entrepreneurs aged between 18-30, The Prince’s Trust provides soft loans of up to £4,000, as well as support for your business idea, with interest capped at 3% and repayments spread over a period of two to five years.

Equity finance

With equity finance a capital sum is injected into the business and the provider of the funds takes an equity share of the enterprise. When the value of the firm increases the stake can then be returned. However, unlike venture capitalists, the expectations and requirements of the providers of public funds are usually less demanding.

It is also worth noting the government Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) which help companies raise finance by providing tax relief to investors who buy a share in your business.

Free or subsidised consultancy

Start-ups can often find themselves in the situation where they are lacking a particular set of skills and there are some specially run schemes which provide this knowledge either for free or at subsidised rates. For instance, the Welsh government runs a business support service offering free, independent advice on starting a business and operates an instant hotline for business queries.

Access to resources

As with a lack of skills, it can be the case that start-ups do not possess the physical resources or facilities they need in order to develop particular projects. In the same way there are a number of initiatives, particularly incubator and accelerator schemes, that can help overcome these concerns by providing access to publicly owned facilities. One such initiative is the department for business, innovation and skills’ (DBIS) GrowthAccelerator which provides advice and coaching to fast-growth businesses with fewer than 250 employees.

Technology and Best Practice transfer

The transfer of technological advances and new best practice initiatives can often take a long time filtering down to smaller businesses. The government has set up schemes which aim to overcome this through business support networks and there is now a number of well-established best practice initiatives such as Investors in People (IIP), which specialises in business tools and resources.

Cost sharing

When it comes to research and development, the costs involved can prevent small firms from taking part. However, by sharing the costs with other businesses, and then sharing the expertise, this problem can be avoided.

Grants for young people starting a business

For young entrepreneurs aged between 18-30, The Prince’s Trust provides soft loans of up to £5,000, as well as support for your business idea, with interest capped at 6.2% and repayments spread over a period of two to five years. This is available through being a delivery partner of the Start Up Loans mentioned above (

Business startup grants for over 30s

Until 2015, grants were available through Prince’s Trust for over 50s. Unfortunately, there are no age-specific grants for over 30s, but schemes such as Start Up Loans have raised their restriction such that there is no upper limit on eligibility.

A Startups member suggests that if you have pension savings these could be used to help finance a business. It’s a finance route that is not well known (and is not right for everyone) but can be very useful in the right circumstances. Crowdfunding was the way we went and if your plan is feasible


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