Grants for Businesses

Funding is a major aspect part of all business. Whether it is small and new, or large and established, adequate finance is required for most projects.

Many small businesses find it very hard to obtain finance, especially if they are starting up or if they are a new business. All lenders require security for loans and many smaller businesses do not have suitable security.

There are many types of grants and schemes available to help businesses looking for finance.

Grants

A grant is where an organisation or authority gives an agreed sum of money to you to help you succeed in a particular business project. Grants are dispensed by the local and national government, as well as by many other concerns.

The main feature of a grant is that the money is not repayable and you pay no interest on the amount given. However, you will need to carry out a significant amount of work to have any chance of obtaining a grant. As the money does not get repaid, the number of grants is limited, and competition for them can be severe.

Grants are designed to assist you in succeeding in a particular project and are not available for working capital or general uses in your business. Grants cannot be obtained any purchase or works that have already been made.

Grants are not given for an entire amount. Grants are mostly given up to half of the project cost. You will have to match the grant by providing remainder of the project costs. This ensures grants are not given to projects that companies are unwilling to invest their own money in.

The process can take several months, so you should always ensure that a decision is made before you start.

Some grants are called Enterprise Grants, these are similar to normal grants, but are usually aimed at expanding businesses in Enterprise areas.

Small Firms Loan Guarantee

The hardest part of obtaining finance for small businesses is having suitable security. The small firms loan guarantee is run by the SBS, and provides extra security by guaranteeing 75% of a loan for businesses. The government will guarantee up to three quarters of your loan in the event of business failure.

Loans are made for between 2 and 10 years, from £5,000 up to £250,000, this is restricted to £100,000 if you are a start-up business. Your turnover must be less than £3million or £5million for a manufacturing business.

Loans are obtained through an authorised lender. All decisions rest with them, however the improved security will help most loans be accepted. In return for the guarantee, you have to pay the SBS, 2% of the outstanding loan every year the loan is in force.

SBS will only assist businesses who are having problems getting normal finance due to security issues. It will cost you more in repayments but it does allow a business to get finance when all other avenues are closed.

These loans may be used for a variety of purposes, but it always helps to have a good and viable business plan when applying.

- 16th September 2004

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