Small business grants worth applying for in the UK for start-up growth

Small business grants can be an effective way for new business owners to reduce start-up costs and streamline operations in the first year of business.

There are many different small business grants offered by the UK government and private entities, helping new entrepreneurs save money and free up liquid capital to grow their businesses.

This makes them an especially attractive prospect for new entrepreneurs looking for low cost high profit business ideas, or business ideas with a low investment.

In this guide, we’ll take a detailed look at what small business grants are, the benefits they can offer, and the features and uses of various business grants for small businesses you may want to apply for.

What are small business grants?

Small business grants are sums of money given to your business, which you aren’t required to pay back.

Unlike business loans, which will need to be paid back to creditors with interest, small business grants don’t require you to budget for repayments or promise a share of your profits to another party.

Although small business loans don’t carry the same financial obligations as private loans, there will usually be some eligibility requirements you’ll have to meet in order to receive a small business grant.

For example, you may need to invest the whole amount of the grant into your business and be able to produce proof of this or the amount of the grant may be adjusted according to the financing you’ve raised from other sources.

For example, if you own a cafe in your local town and one of your business goals is to increase revenue. By expanding your outdoor seating area, you can encourage more customers to dine with you during the busier summer months.

As the owner, you can apply for a small business grant to help cover the costs of purchasing new outdoor furniture, installing awnings and renovating your outdoor space to incorporate al fresco dining.  You may need to invest 30% while the grant program provides the remaining 70%.

Why are small business grants helpful?

The terms of every small business grant will be slightly different.

However, there are universal benefits of funding your business using small business grants, as opposed to sourcing finance through loans or other kinds of private financing.

Some of the features that make small business grants especially helpful include:

• You don’t have to pay the grant back and can invest the capital into growing your business without having to budget for future repayments.

• You won’t have to dilute control of your business, which is something you’ll need to consider when using equity finance.

• The variety of small business grants available, giving you more flexibility to find a program that fits your business’ size, industry, and goals.

• The potential for synergy with other forms of small business finance, and reducing the impact of business loan repayments or shared equity.

• Grant approvals can act as a sign of endorsement and improve your chances of receiving additional grants or other kinds of funding in the future.

What grants are available for small businesses?

In the UK, there are hundreds of government grants for small business, as well as grants managed by private bodies.

Each of these grants has its own distinguishing features in terms of the type of business and activities they’re intended for.

Small business grants are typically created to support a specific objective or project that the provider is involved in, for example the government’s Net Zero initiative or supporting female entrepreneurs.

Here are some of the categories of small business grants based on their overarching goals:

• Sustainability grants, which help to fund activities or projects that make a business’ operations more sustainable and reduce their impact on climate change.

• Job creation grants, which are designated to get more people into employment. These may be focused on specific population segments such as people living with disabilities.

• Start-up grants, which are designed to help new businesses.

• Research and development grants, which are available for businesses that are developing new products or services that contribute to a certain technological niche.

• Training and mentorship grants, which help support professional development and networking for either entrepreneurs or their employees.

Remember that these are only some of the more common types of small business grants, and there’s a wide variety of grants in more specific niches that could be more appropriate for your business and its aims.

What are the eligibility criteria for small business grants?

Different small business funding grants are intended to encourage different results either in local communities or the UK economy as a whole.

To successfully apply for a small business grant there are various sets of eligibility criteria you may have to meet.

Business size

As many small business grants are intended to help sole traders and small-to-medium sized businesses (SMEs) develop, there may be a limit on the size of the business that can apply. 

For example, the Help to Grow: Management program only accepts applications from businesses with between 5 and 249 employees.

Sector or industry

Some small business grants may be tailored to a specific industry niche, or have an overarching goal that excludes certain types of businesses from qualifying. 

For example, the UK Shared Prosperity Fund's (UKSPF) overarching goal is to stimulate growth on high streets and help people take pride in their local community. 

Due to this, their grant is limited to businesses that have a physical premise and might preclude applications from home-based sole traders like personal trainers or those running a purely online business.

Geographic location

Small business grants can also be limited by geographic region, either focusing on businesses in a specific town or city, or only catering to businesses that meet certain geographic requirements.

Elmbridge Business Boost, for example, caters to businesses in Elmbridge, Surrey.

The Gigabit Broadband Voucher Scheme (GBVS) is an example of local small business grants only available to businesses based in rural areas where broadband infrastructure is underdeveloped. 

This is particularly beneficial to those starting a business from home, selling products through an online store or freelance consultancies.

The purpose of the grant

The overarching purpose of a small business grant is another factor that could affect your eligibility, requiring you to show business plans to use the grant in line with the objectives it was set up to achieve.

The Workplace Charging Scheme, for example, is set up to develop the UK’s wider EV charging infrastructure and reduce the nation’s carbon emissions. 

This program is particularly beneficial for brick-and-mortar businesses who are trying to develop a positive workplace culture by providing more convenient facilities for their employees.

Aside from these kinds of sustainability initiatives, some grants might be issued for purposes such as research and development, skills training, or exporting.

Financial health

Although small business grants don’t need to be paid back, the organisations that issue them usually want to see some assurance that your business will be able to use the funding effectively.

Some grants such as the Seed Enterprise Investment Scheme may require proof of your business’ financial health, such as positive cash flow statements, financial analysis, or break even analysis.

Ownership and structure

Some grants may also require the business to meet certain ownership criteria. 

This criteria can include your business being UK-owned, or being owned by someone from an under-represented demographic. One example of this is the PitcHER grant, which is only available to female and non-binary entrepreneurs. 

Small business grants can also require applicant businesses to have a certain structure, like the Seed Enterprise Investment Scheme, which is only available to limited companies.

How to apply for small business grants?

The eligibility requirements and purpose of small business grants can vary a lot from one specific program to the next. However, there are certain steps that you should plan for whenever you’re thinking of applying for a grant.

Research grant opportunities and eligibility requirements

There are countless active small business grants in the UK, with nuances that can make them more or less suited to your business’ unique situation. 

Resources such as gov.uk’s Find a Grant directory, websites for local authorities, and trade journals, can all be useful for researching available small business grants.

You may also be able to find out about business grant opportunities through small business networking, especially with business leaders who run similarly-sized businesses in the same industry as you.

Have a detailed, well-crafted business plan

Applying for a small business grant will generally require you to present a detailed business plan. 

This will show the grant provider that you’re a legitimate business with a long-term plan that will inform how you’re going to use the grant if it’s approved.

It’s important to review how to write a business plan with all its essential components, such as a business concept, mission, and target market, as well as details about your product pricing or service pricing. 

Ensuring you have all these sections fully addressed in your business plan and as part of your wider small business checklist, your application for a small business grant will be more in line with established best practices. Furthermore, it will help grant providers understand exactly how you’ll use any funding you receive, for example, employee hiring drives or scaling your business in a way that benefits the local community.

Depending on the grant and its overarching purpose, you may want to create new drafts of your business plan that emphasise how new funding will contribute to maximising your business opportunities, and how these will align with the requirements of the grant you’re applying for.

Prove your business’ financial liability

Similar to private lenders, organisations that manage business grants will also want to see that your business is financially viable and can sustain long-term profit.

Before applying for a small business grant, take some time to organise your business’ financial documentation, including:

• Profit and loss statements.

• A cash flow statement, including your operating cash flow, net cash flow, working capital, and cash flow forecast for the near future of your business.

• Payroll records outlining how you pay employees and how you pay yourself as a business owner. This may be required as proof of the size of your business, and your employee hiring practices.

• Small business tax statements, company tax returns, and VAT returns. Ensuring that your tax filings are up to date will further affirm that you’re a legitimate business in the eyes of grant providers.

Articulate your impact on your community and economy

Many small business grants have an overarching goal of growing the local or national economy in a general sense or contributing to specific social or sustainability projects.

Some things you should take the time to outline include:

• Charitable contributions you’ve made from your business profits.

• Employment practices that have created jobs in your local community.

• Workplace culture initiatives that have helped your staff engage in vocational training and develop their career.

Being able to show this evidence will help communicate to grant providers that your business philosophy can align with the broader goals of the program, and that any funding will contribute to a broader positive impact.

Increase your chances of a successful grant application

Each small business grant will have its own set of rules and processes that need to be followed closely to maximise your chances of approval.

Before you finalise your application, it’s important to make sure your grant is submitted:

• On time, according to the grant’s specific application periods and deadlines.

• With references from individuals or organisations who can vouch for your small business.

• With all the details required by the grant providers.

• Accompanied by all necessary supporting documentation, for example your business’s financial records and business plan.

16 government grants for small businesses

The UK government, and many local authorities, maintain small business grants for a variety of industry niches and uses. 

Here’s a brief comparison of some of 16 government grants available for small businesses in the UK.

Small business grants London

There are small business grants specifically for London-based businesses. For merchants focusing their efforts towards tech innovation, sustainability, and international growth the following grants are worth considering.

Small business grants Wales

There are grants available to small businesses based in Wales that need support with operational growth and sustainability efforts.

Small business grants Manchester

If you’re a merchant based in Manchester, there are small business grants available that can support your small businesses in achieving goals that relate to job creation, innovation, and sustainability.

How to use small business grants effectively?

Outside of grants that require you to spend a specific amount on a particular purpose or project, there’s a variety of ways you can allocate small business grants to develop your business.

Here’s some of the most effective ways that you can use the capital from a small business grant.

Start a new business

There are specific starting a small business grants for new entrepreneurs who need initial capital to make their business ideas a reality. 

If you already have a detailed idea of how you’ll manage a business, but the cost of starting a business looks prohibitive, then applying for a small business grant for starting a business could be the best way to cover your start-up costs and get over this barrier to entry.

Expand your operations

The capital from a small business grant can also be a great tool for achieving the next phases in your business growth strategy.

This can be done through activities such as opening new premises, entering new markets, or simply streamlining your existing operations to work towards your business development goals more efficiently.

If you’re a restaurant owner, for example, you may want to expand your operations by opening a new restaurant under the same brand name, or investing in a delivery service to serve a new target market.

Purchase new equipment

If scaling your business requires access to essential equipment, machinery, or software, business grants can help you cover the cost of these, and reduce the amount of risk management you’ll have to tackle while investing in physical assets.

For example, brick-and-mortar businesses like independent retailers, cafes and bakeries may want to use equipment grants to invest in POS systems and card readers.

Service-based businesses, for example independent personal trainers, might invest this money into more industry-specific assets like exercise equipment.

Hire and train staff

As many small business grants are centred around stimulating the economy through job creation, hiring new staff is another use you may want to consider.

Beyond this, business grants like the Prince’s Trust Enterprise Programme can be used for vocational employee training. 

These kinds of small business grants will not only help you cover the cost of training courses and materials, but support your employee motivation and employee retention strategies by providing a higher degree of personal development within your business.

Develop new products or services

Small business grants can be helpful for small businesses that are looking to develop new products or services. 

Though the UK government’s innovation funding program has grants that are intended for larger, tech-oriented businesses, grants like the UK Shared Prosperity Fund (UKSPF) can help to reduce the expense of setting up a physical premise, and free up funds for innovating your products.

If you’re starting an independent craft shop, for example, this kind of small business grant could reduce the cost of opening your store. This can help provide additional liquid capital for target market research, researching alternate materials and developing new handmade products.

Manage your cash flow

Small business grants can provide an instant deposit of cash into your business account which you won’t have to worry about paying back.

This will allow you to stabilise your small business budget and create a financial reserve you can rely on if your business goes through challenging periods.

It can also help you achieve a healthier average cash flow statement, which could make it easier to secure private funding in the future.

Remember that not all grants will cover 100% of the total funding allocated, and some will require you to provide a portion of the grant in order to be approved, for example investing 30% while the grant program provides the remaining 70%.

Invest in marketing

Many small business grants designated for business development can be used in an indirect way to support customer acquisition initiatives, and executing the more costly parts of your long-term marketing strategy without having to seek out private financing.

If you want to expand your marketing strategy through new channels, for example email marketing or social media marketing, a business development grant could be the ideal way to hire new staff to expand your capacity.

Expanding online

Business development grants can help to fund purely physical businesses to expand by investing in their online presence. 

A high street retailer, for example, could use a grant to set up an e-commerce store. Service-based businesses like personal trainers and mobile car cleaners can use the same funding to market their business through social media, SEO, and other channels.

Adopt sustainable practices

Business grants like the Clean Growth Fund are specifically focused on improving sustainability in the UK economy. 

These can be used by approved small businesses to reduce the environmental impact of their activities and contribute to the government reaching its Net Zero target.

Retailers, for example, may be able to use business grants to invest in more sustainable packaging. While restaurants and cafes can use their grants to develop water-saving systems or a more localised supply chain.

Aside from making your business activities more sustainable, these kinds of initiatives can help reduce your operating expenses, leading to more savings in the future.

Access international markets

In some cases, small business grants can also reduce the usual cost of entry into international markets, helping to expand your audience and potentially generate a greater sales volume for your products.

If you own a cafe brand, for example, and sell a signature coffee blend through your e-commerce store, you may be able to find a small business grant to ensure your packaging complies with overseas regulations or create new, localised versions of your website.

By reducing the cost of taking your business into a new market, you’ll be able to diversify your revenue streams and protect your business from local economic fluctuations, without having to incur large debts or reduce your profit margins too drastically.

Recover from challenges

Sometimes, unexpected challenges can have a sudden, negative impact on your business’ cash flow and create a need for liquid capital to cover essential expenses.

These can either be issues affecting your business specifically, like a cyber security crisis, or macroeconomic events like Brexit, COVID-19, or a rise in inflation.

Small business grants, whether acquired preemptively as a financial buffer against emergencies, or immediately after a crisis, can help support your business’s operations management and even save it from bankruptcy in more severe cases.

Disclaimer: The contents of this page are intended for informational purposes only and should not be construed as professional advice. For matters requiring legal or financial expertise, it’s recommended to seek guidance from qualified professionals.