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As a startup, it is useful to understand the financial support available to you. This can come not only from private investment but from a variety of other sources. This includes funding through the government, which can take the form of a government grant. Furthermore, you may seek loans from social enterprises or philanthropic sources. This article will outline some of these key alternative funding schemes for startups and early-stage businesses.
What Alternative Funding is Available?
Government funding exists mainly in the form of grants, which typically do not need to be repaid. Grants can come in a number of forms and cover a range of awards, and often, a grant is made for a specific purpose. For example, a business grant may be given to help you purchase equipment, help with IT costs, or even help cut business rates or your costs for rent on your premises.
Different government grants have different application processes, and some will have difficult criteria and requirements. However, securing grant funding can be crucial for your business growth and increase your profit margins significantly. In general, you will have to present a business plan, which might involve some market research on your part.
Loans, on the other hand, are slightly more straightforward and will operate like an unsecured personal loan. For example, you can receive up to £25,000 through a UK government-backed Start Up Loan alone. Therefore, it is worth considering all of your funding options when considering how to finance your new ventures.
What Government Grants Are There?
Some examples of government grants that are currently available are outlined in the table below.
| Grant | Explanation |
|---|---|
| Plug-In Van Grant | If your business needs an electric van for transportation, the government will cover up to 20% of the cost (up to £8,000). |
| R&D Tax Credits | The government will give cash payments to help fund research and development projects relating to a science or technology project. |
| Local Enterprise Partnerships | This grant allows local authorities to partner with local businesses in need of funding. |
| Prince’s Trust Enterprise Programme | This government grant funds and trains young people between 18 and 30 years old looking to launch a start-up business. |
| Tax Relief in the Creative Industries | If your startup is eligible, you may receive a refund of up to 20% of your eligible costs as a tax reduction. Sometimes, this could be a cash payment. |
If you are looking to secure government grants, you will want to ensure that you speak to the grant-making body and present a professional business plan. In creating it, focus on the objectives of the grant and demonstrate how your business aligns with the grant’s goals. For example, a grant might exist to help job creation, so showing how your business will create new jobs can give you a competitive edge.
Some grants will also want you to match the funding that they grant. Therefore, you may want to ensure that your business has enough cash to meet these requirements. Finally, you will want to start applying early, as many grants will operate on a first come, first serve basis.
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What Social Enterprise or Philanthropic Loans Are There?
As a startup, you could also be funded from loans from social enterprises and philanthropic sources. Some examples of loans include:
- The Greater London Investment Fund Loan: available if you are based in London, have a viable business model and business plan and have not succeeded in securing other types of private finance.
- The Fredericks Foundation Loan: applies to social enterprise businesses unable to secure a loan from other sources.
- A Funding Circle Business Loan: offers a variety of loans, including a government-backed loan.
- The HSBC Small Business Loan: available at a fixed interest rate.
Often, to secure a loan, you will need a good credit rating. As a result, it is imperative that you maintain a healthy credit rating.
LegalVision’s Startup Manual is essential reading material for any startup founder looking to launch and grow a successful startup.
Key Takeaways
As a startup in England, you should explore funding options from the UK Government and similar alternative sources. Funding exists in the form of grants and loans, which can be useful depending on the stage of your business. Some grants can offer significant benefits as well as mentoring, while others are to be used for fixed purposes (such as purchasing a vehicle) or as a form of tax relief. To increase your chances of a successful grant application, ensure you do your research early and create a strong business plan.
Frequently Asked Questions
A grant is a set amount of money given to individuals or businesses that meet certain criteria. It does not have to be paid back.
A fixed interest rate means that the interest that you pay on your loan is determined from the beginning of the loan arrangement.
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