Understanding Small Business Grants

As a founder of an innovative startup or small company, you may be interested in grants for forward-thinking business owners like yourself. You will be pleased to know that there are 60 government grants for businesses in England and Wales that either have not started trading or are in their startup phase. This article will give you an overview of how small business grants operate in England and Wales, where to find them, and how to prepare your grant application. 

What is a Business Grant?

A grant is a gift of money that a recipient must use for a specific purpose. Usually, the donor of the money is a local authority. 

If the money is not used for its intended purpose, the donor can “claw it back.” This phrase is another way of saying the donor can legally require you to return the money. However, there is no legal obligation on you to use the money for a specific purpose, which is one of the distinguishing features of a grant. 

Additionally, grants may be available for a fixed period, and each grant may have different criteria. 

Other kinds of money available for small businesses include:

• finance;
• equity;
• loans; 
• expertise and advice; and
• recognition awards. 

Key Elements of a Grant 

Generally, if you receive a business grant, it will have the following elements:

• the donor will give your business money that you can use to meet specific objectives, like upgrading your business’ IT infrastructure;
• the money will not be used in a way that directly benefits the donor; 
• you have the option of using the money for the intended purpose or returning the money without any fees; 
• the donor, such as a local authority, will be obligated to pay you the money if you are awarded the grant; and 
• you will have to return any surplus money to the donor. 

What Qualifies as a Small Business?

The UK Government breaks businesses into the following categories:

• not yet trading; 
• startups (1-2 years trading); or
• established. 

If you have not yet engaged suppliers or sold any goods or services to customers or clients, then you would be classified as “not yet trading.”

Likewise, if you have been active for less than two years, you will likely qualify as a startup. However, note that the terms of the particular grant may specify something else. 

What Are the Most Common Small Business Grants?

In general, small business grants are awarded either based on:

• region; or 
• industry. 

There are also grants available across regions or for businesses across different industries. 

Region 

Most business grants are region-specific. This means one of the key criteria to receive this type of grant is that your business must be based in a specific part of England or Wales. 

Further, the Government breaks down England and Wales into the following regions:

• East Midlands;
• Eastern;
• London;
• North East; 
• North West; 
• South East; 
• Wales;
• West Midlands; and
• Yorkshire and the Humber.

For your reference, Scotland and Northern Ireland are their own respective regions. 

Therefore, a good place to start looking for business grants is to go to the UK Government’s Business Finance and Support website and narrow it down by the region your business is based. 

Industry 

Alternatively, you can see what grants are available based on the industry your business operates within. The list of industries include:

• Agriculture and food;
• Business and finance; 
• Construction; 
• Education; 
• Health; 
• Hospitality and catering; 
• IT, digital and creative; 
• Life Sciences; 
• Manufacturing; 
• Mining; 
• Real Estate and property; 
• Science and technology; 
• Service Industries; 
• Transport and leisure; 
• Utilities providers; and 
• Wholesale and retail. 

Grant Application Process

Each grant will have its own particular criteria for consideration and awarding. Almost all grants will provide guidance on how you can apply. 

General Tips for Applying for Grants

Importantly, you should always do as much research as possible before applying. In particular, you should try to figure out:

• who is awarding the grant, e.g. a local authority like Lambeth council or a public body like the Heritage Fund;
• what the purpose of the grant is, e.g. to cut carbon emissions in Anglia; and 
• how much the grant is for — in some cases, there will be different amounts available. 

Many grants require significant time and energy. They tend to be quite competitive because there is only so much money available to disperse to small businesses. 

Therefore, before applying, you should realistically assess:

• if you meet all the criteria; 
• how much time you have to spend on the application process; 
• if you will be able to use the grant money for the stated purpose; and
• if your business stands to benefit in the long run from being awarded the grant. 

Phases of the Grant Application Process

Grants generally will have some combination of the following phases in the application process:

Key Takeaways

Business grants can be great ways to help your small business grow and thrive. You do not have to pay the money back as long as you use it for the stated purpose. Grants tend to be awarded based on where your business operates and what industry it operates in. The donors tend to be public authorities like your local council or certain national authorities. 

The downside with grants is that the application process tends to be competitive and can take a significant amount of time. Therefore, you should be strategic about which grants you apply for. 

If you need help with how to draft a grant application for your small business, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Visit our membership page.

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