Types of UK business grant

Gill Laing
Last Updated: 7 May 2023

A business grant can offer vital funding for a startup or small business, helping to get a new venture off the ground or by giving an existing business a financial boost, either in its’ infancy or to support its growth.

In this guide, we look at how this type of funding works to see if a grant may be right for your business, whether you’re looking to start up, scale up or stay ahead.

What is a business grant?

A business grant is a sum of money awarded to either a new business to help it get started, or to an established business to help it expand or develop. The money could be used to invest in a variety of different things, such as research, training, equipment, upgrading facilities, larger premises or the creation of jobs. However, generally speaking, the funding from a grant will be aimed at a specific business-related purpose or project, as set by the grant provider.

Business grants are usually awarded by the UK government, at either a national or local level, or by charitable or private organisations. Unlike a business loan, or any other form of financing — including crowdfunding, venture capital and angel investment — the successful recipient of a business grant won’t be expected to pay this back or provide any return on what they’ve been given, for example, by way of a percentage stake in their company.

What are the benefits of a business grant?

The main benefit of a business grant is that you won’t need to repay the amount awarded, either with interest or otherwise. You’ll also retain full control of your business, where you won’t be required to give up any equity or allow a third party to have a say in how your business is run. However, this type of funding is usually to back a specific business-related purpose or project, where there will be a level of control within the criteria and conditions as to how the funding is spent. Additionally, many grants will require a level of matched funding.

The concept of matched funding is simple: you put up a percentage of the total funding and the grant provider puts up the rest, although the percentage required can vary. Some grants may require you to match the value of the business grant, like for like, whereas others may ask for an even greater contribution. Either way, under the old adage of “putting your money where your mouth is”, you may be required to show, through your own cash injection, that you’re prepared to financially back the specific purpose for which funding has been awarded.

There may also be other rules and requirements in place, where the benefits that can potentially be obtained from a business grant comes down to the nature of the grant scheme and what conditions are attached. It’s therefore important to thoroughly check the basis upon which an award will be made, not only to make sure that you qualify, but that the purpose of the grant is something which will be of real benefit to you and your business.

Is a grant right for your business?

Whether a grant is right for your business will primarily depend on the criteria required to qualify for funding and the conditions attached to any award made. The nature and extent of any financial help that may be available to you will very much depend on:

the size and type of business that you’re running or looking to run
the type of funding sought, for example, a startup grant or funding to grow your business
which region in the UK your business is, or will be, based
what you intend to use the grant money for.

The best way to establish if a grant is right for your business is to carefully consider what’s involved and to compare the different options available to you. Whether or not you’ll be eligible for this type of funding will not just come down to things like your industry sector and where in the UK you’re located, but often a whole host of other requirements.

You should also take into account any post-grant conditions, where there may be processes that you need to follow once you’ve been given the money. Many grant providers will want to work closely with you throughout the lifecycle of any specific project. They may also conduct checks at the end to confirm that you’ve delivered on any promised outcomes.

What are the different types grant available for UK businesses?

There are various different types of grant available, from both the public and private sector, including various small business grants for startups and established businesses. Many of these schemes are aimed at specific industries or types of business, but with government business grants placing a particular focus on the UK economy in the wake of the pandemic and Brexit.

For example, if your business is looking to innovate, where you’re wanting to bring something new to the market, innovation grants could be an ideal option, especially for breakthrough tech-based research and development that could help the UK economy grow. Innovation grants are provided by a variety of funding bodies, such as Innovate UK, to support innovative ideas and business growth, including individuals and organisations looking to research and develop a commercially viable process, product or service.

Alternatively, as a startup or small business that’s focused on connecting people and communities to either the national, regional and local heritage of the UK, in this way helping to boost the UK’s visitor economy, you may be eligible for a grant from the National Lottery Heritage Fund. This provides funding to sustain and transform the UK’s heritage, including investment in museums, parks, historic places and cultural traditions, although heritage can arguably be anything from the past that you value and want to pass on to future generations.

However, there are hundreds of other grant schemes available, some nationwide, others local, with new initiatives cropping up all the time. Most recently, the government has made funding available to some local authorities in England that are gradually introducing clean air zones. Under these air quality grant schemes, you may be eligible for funding to support your business with upgrading your vehicles or paying for the new low emission charges.

Where can I find out about business grants?

To find out more about both local and nationwide grant schemes, you can search the ‘Finance and support for your business’ online tool at GOV.UK. You can filter your search by selecting the ‘grants’ tick box, together with the stage at which your business is at, your industry sector, the number of employees you have or intend to have, and region of the UK in which you’re based or plan to set up your business. You’ll then be given an overview of how much you can get, who the funding is for and what you can get, together with a link to the relevant website for more detailed information about the scheme in question.

Other ways in which you can find out more about small business grants and government business grants, as well as other forms of support and sources of finance available, include:

searching the Local Enterprise Partnerships (LEP) Network website, where the LEP Network lists 38 regional ‘growth hubs’, bringing together all the available national and local business support on one hub, making it easier for businesses to find help and funding;

calling the Business Support Helpline on 0800 998 1098, where an advisor will be able to offer free advice about starting a business and can also direct businesses to more support;

asking your local authority about grants available in your region, as either a startup or established business, and funding specific to your industry sector.

How do I apply for a business grant?

There’s no one-size-fits-all approach when it comes to applying for a business grant, where the application process can vary depending on the rules and conditions of the scheme in question. That said, these applications are almost always complex, requiring careful preparation and plenty of man hours to stand any chance of a successful outcome.

You should always do your research and ensure that you fully understand the procedure to be followed before submitting an application, as well as being prepared to invest sufficient time and attention to writing a grant proposal worthy of receiving funding. By failing to follow the correct procedure, or by misconstruing what’s required of you, this could easily void your application or otherwise deny you of a golden opportunity to raise funds for your business.

The following practical tips can also go a long way towards bolstering your chances of success:

always talk to the body awarding the grant to find out what they’re looking for, whether you’re eligible and tailor your application to their objectives;
write a thorough grant proposal, specifically setting out how you’ll use the money, how your business meets the qualifying criteria and what funding will mean for your business;
always apply early as some grant schemes not only have strict deadlines but a limited pot of money, so it’s always worth getting your application in as soon as possible.

Writing a successful grant application isn’t easy, where seeking expert advice can make the difference between a good application and a standout application. In support of your grant application, you may also need to include a detailed business plan, including sales projections and cash flow forecasts, together with financial evidence if you’re already trading.

How are business grants paid?

In the same way that business grant schemes can have specific criteria and conditions, there will usually be certain rules about how any grant will be paid out in the event that your application is successful. It will all depend on the type of grant that you’re applying for.

For example, you might receive your grant as a single lump sum upfront or be reimbursed after spending your own money. You may even need to prove that you’ve matched the value of your grant before any funding is paid out. However, business grants aren’t always provided in the form of finance, but can instead be by way of free equipment, discounts to aid the development of your business or vouchers for things like training.

Whatever form your business grant takes, there will usually be conditions attached, either before it’s paid out or in the way in which this is spent. You should therefore carefully research and adhere to any post-grant conditions to avoid being penalised, including the possibility of having to repay your grant for unauthorised spending or non-compliance.

Alternatives to business grant funding

If you’re unsure whether grant funding is right for your business, there are plenty of alternatives available, including business loans and equity finance.

With a business loan, you borrow a lump sum of money and then repay this sum, together with interest. Lenders include high-street banks, online lenders and small local specialists.

Equity finance, on the other hand, is much more complex. This is essentially a way of raising capital in return for a share in ownership of a business and/or its profits, although this can be a good option for startups or small businesses finding it hard to obtain borrowing.

In either case, however, expert advice should always be sought to explore all potential finance solutions on the best available terms.