What Grants are Available for Startups?

Startup funding can be difficult to secure with many entrepreneurs forced to rely on bootstrapping or the so-called “friends, family and fools”. However, if you know where to look, there are specific grants available for startups that can help give your business that initial boost.

 

What is a Business Grant? 

A business grant is a scheme, typically funded by the public, which offers cash, discounts, resources or equipment, to entrepreneurs and small business owners.

These initiatives are designed to facilitate businesses, usually those which are deemed to show potential and which can positively impact a particular industry or the wider economy.

The cash awards vary in amount depending on the scheme. On the whole, business grants do not come with the need to pay interest, pay back the loan or give away any equity. For that reason, they are viewed as a great option for startup funding

 

Types of Grants

 

Direct Grants

A direct grant is a cash award given to a business in order to carry out a specific project. The majority of these schemes will match costs. In other words, the amount of money you are able to raise by yourself will then be matched by the scheme, doubling your funds.

Typically, these types of grants come with stipulations about how the money should be spent and you will need to adhere to particular regulations.

On the plus side, the sum of money awarded to you does not need to be paid back. For that reason, they are extremely competitive and may be more obtainable for niche markets or for fields where there is already generous funding available.

 

Resource & Training Grants

Startups, due to their age, can often find themselves without the necessary resources, skills, facilities or expertise required to maximise their project’s potential. To combat this, there are many initiatives available which are specially designed to facilitate startups.

Incubators and accelerators are facilities designed to provide startups with the necessary resources. Whilst both help startups, accelerators tend to offer a more hands-on approach whilst incubators typically offer ad-hoc assistance for legal and business matters. Both usually offer a workspace and access to resources and field experts.

Innovation vouchers are another option, which are supplied by the government through Innovate UK. This initiative offers packages of up to £5,000 to enable your business to enlist expert help from anything to tech, to product design to intellectual property.

In addition, there are many schemes in places across the UK where local councils have business support grants available. These local councils may also be able to offer grant money, put on workshops and provide free training.

The government has many schemes in place to create expert networks and share knowledge. This can be especially relevant for ever-changing industries and technological advances. Additionally, the UK government offers regional helplines which can provide free, personalised advice across multiple platforms.

 

Research & Development Grants

For startups in a specific field, there are often grants available to fund research. Also known as research & development tax credits, these are payments made by the government for companies to carry out projects relating to technology and science.

 

Tax Relief

One of the killer costs of setting up a startup is the amount of tax needed to be paid. However, for this, the government runs multiple schemes aiming to reduce tax. These include: 

 

Corporation Tax Relief: For projects undergoing any research and development, they may be able to apply for Corporation Tax relief.

 

Employment Allowance: This enables companies to reduce the amount of national insurance they need to pay by up to £3,000 annually.

 

Business Rates Relief: If your business occupies only one property whose rateable value is less than £15,000, you can be eligible for this type of tax relief.

 

Enterprise Zones: These are designated areas of the UK which offer tax reliefs to eligible businesses who are launching businesses in those areas, so it is worth researching to see if you are in the right area.

 

Incentivising Investors 

In addition to the tax reliefs for the startups themselves, there are tax benefits available to investors to incentivise them to invest in startups. These include the government’s Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS).

EIS focuses on medium-sized startups and allows individuals to invest up to £1 million per year, receiving a 30% tax break in return. The investor will not need to pay any capital gains tax on any profit that arises from the sale of the shares after 3 years.

SEIS focuses on companies in the very early stages. An individual is able to invest up to £100,000 annually and receive a 50% tax break in return. In addition, as with EIS, investors will benefit from capital gains tax exemptions on any profits from the sale of shares after 3 years.

For both EIS & SEIS,investors are exempt from paying inheritance tax on shares held for a t least two years. Additionally, if shares are sold at a loss, this loss can be offset against capital gains tax to reduce losses for the investor.

By incentivising investment, the investor can enjoy many benefits as well as encouraging more entrepreneurs to receive funding and support when setting up their startup.

 

Specific Business Grants

As well as industry-specific business grants, there are also grants which are designed for specific entrepreneurs to help them get their start. These can include, but are not limited to, business grants for women, business grants for young entrepreneurs, business grants for those over 30, business grants for social entrepreneurs and business grants for those with bad credit.

All of these initiatives are designed to offer funding to those who typically find it more difficult to secure funds. In the process, they are able to diversify entrepreneurship and encourage more individuals to start a company.

 

Soft Loans

Although not strictly a grant scheme, soft loans can be government-funded and can offer additional support in setting up and running a business so may be a good alternative. 

Unlike grants, soft loans do need to be paid back but the conditions of repayment are more flexible than they would be with a traditional loan. This could be that the loan is no-interest or lower interest or that it can be repaid over a longer period of time.