How do I secure and apply for a grant?
Finding and securing funding needn’t be a daunting process. There are plenty of options available both nationally and locally, and the publicly funded schemes are all about encouraging growth, creating jobs, and cultivating wealth.
Put simply, grants are a sum of money given by a government or organisation for a particular purpose. Businesses can apply for grants from the government, the European Union, local councils, and charities. It’s important to remember that grants usually require the business to ‘match fund’ them, which means putting up around 50 to 70 per cent of the project cost with the remainder being provider by the grant.
There are several types of government business grants available, and the most suitable type is a direct grant. This is a cash award given to support vital business activities such as training, purchasing new equipment or machinery, and development and investment. Currently, there are over 300 direct grant agencies that offer grants between £5,000 and £500,000, including loans for Start Up businesses.
You’ll be glad to know that most businesses are eligible for grants at some stage in their development, usually at the very beginning of their journey.
Alternative sources of investment
Alternative ways to finance your business
There are several ways to fund your business that don’t require a loan or grant, including:
- pledging your personal sources of finance to support the start-up
- securing buy-in from key investors known as ‘business angels’
Most start-ups won’t be of interest to investors like ‘business angels’ (such as Cambridge Angels); these are venture capitalists and private equity firms that invest in businesses looking for a higher rate of return on investment and an exit plan. However, if you’ve had interested parties approach you, take advantage of the investment opportunity by presenting them with your business plan.
On the other hand, crowd-funding is an excellent way to grow a small business. Individual investors collectively invest in a business, each pledging a certain amount in return for a stake in the company, return on investment, or other benefits – like discounts. Currently, there are several crowd-funding platforms available for like-minded investors to support international businesses and creative projects, including crowdfunder.co.uk, crowdcube.com, and kickstarter.com.
Another fast-growing option known as ‘factoring’ is becoming increasingly popular with SMEs. Since the restriction of bank financing and the credit crunch, this practice has become a major source of working capital. It provides cash flow for businesses by releasing value tied up in outstanding customer invoices, allowing them to manager sales ledgers and credit control processes. To take advantage of this option, businesses will need an annual turnover of at least £50,000. If your business has an annual turnover of more than £250,000, confidential invoice discounting may be a better option.