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Grants can make a world of difference to small businesses. They can help get a new venture up and running by covering some initial costs, or they can provide an extra boost that enables growth.
But it can be tricky to navigate the different funding sources, eligibility requirements and tax implications – especially if you’re considering a grant for the first time.
To make things a bit clearer, we’ve put together this guide to take you through the basics and answer some common questions about grants for small businesses:
- Who can apply for a small business grant?
- Who provides small business grants?
- What can I get a small business grant for?
- Are small business grants taxable?
- Tips for finding small business grants
- Tips for applying for small business grants
- Alternatives to small business grants
To be eligible for a small business grant, you may need to prove that your business qualifies as a start-up or SME. The specific criteria will vary from grant to grant, but will typically take into account factors like your business turnover, how many people you employ and how long you’ve been in business.
If the small business grant is funded by the UK government, the definition of an SME is likely to be in line with the Company’s Act (2006).
Other grant providers may look at demographic criteria – often prioritising groups that are underrepresented within their industry or individuals who could face increased challenges when applying for other types of funding. For example, some grants are only available to women, under 30s or Black-owned businesses.
Small business grants can come from a few different sources. Each grant provider will have their own priorities in terms of which businesses they want to support and which kind of work or project they’re willing to provide grants for.
Small businesses can apply for a number of government-backed grants. Grants funded by the UK government usually align with specific policies, targets or objectives – such as ‘levelling up’ or reaching net zero.
These grants may come in the form of discounts, vouchers or tax credits, as well as lump sums of cash.
While the UK government funds a few different grants, they’re often allocated to businesses by other parties.
For example, the COVID-19 Business Grants scheme was launched during the pandemic to support businesses impacted by restrictions. The central government allocated £27 billion to local authorities, which then distributed grants to businesses in their local areas – with micro, small and medium-sized businesses receiving 95% of the funding.
As well as distributing funding from the central UK government, councils and local governments sometimes offer grants to businesses that create jobs or drive growth in the local economy.
Check your council’s website for information about small business grants in your area.
UK Research and Innovation (UKRI)
Sponsored by the Department for Business, Energy and Industrial Strategy (BEIS), UKRI is a non-departmental public body. It brings together Innovate UK, Research England and seven disciplinary research councils to fund businesses, researchers and institutions like universities, NHS bodies and charities.
Businesses can apply for both grants and loans, and the main opportunities for funding are in areas such as regional growth, industrial challenges and international collaboration.
The European Innovation Council (EIC)
Established as part of the EU’s Horizon Europe programme, the EIC provides financing, coaching and mentoring to support disruptive, breakthrough innovations. 70% of the EIC’s annual budget is earmarked for start-ups and small businesses.
Despite Brexit, UK businesses can still apply for grants of up to €2.5 million through the EIC Accelerator – but there may be certain conditions. For example, you would need to relocate to an EU country in order to apply for ‘blended finance’, which combines a grant with an equity investment.
The Prince’s Trust
The Prince’s Trust is a charity that helps 11 to 30 year-olds get into employment and education. Since 1983, the Trust has helped more than 90,000 young people set up a business.
18 to 30 year-olds can apply for the Trust’s Enterprise programme, which provides training, mentoring and funding opportunities. The majority of financial support comes in the form of loans – but start-up grants for small businesses are also available under special circumstances.
Competitions and awards
Many types of organisations – such as universities, large companies, trade organisations and industry bodies – run competitions for startups.
Typically, the best idea or business plan is rewarded with a grant. The winner might also get access to resources or support from experts in the field.
Business grants for software
Help to Grow: Digital is a government-backed scheme that helps SMEs embrace digital ways of working. As well as providing free, impartial advice and guidance, the scheme enables businesses to buy new software for accounting, eCommerce or customer relationship management (CRM).
The small business grant is offered in the form of a voucher, which can be redeemed on approved suppliers’ websites, and covers up to £5,000 or 50% of the total cost.
Business grants for electric vehicles
Funded by the UK government, the ‘plug-in’ grant scheme makes it cheaper to buy certain types of low-emission vehicles. While the scheme stopped covering cars in June 2022, it still covers vehicles such as vans and trucks.
You don’t need to apply for the grant, as the seller applies a discount to the purchase price. The value of the discount depends on the type of vehicle, and only approved vehicles are eligible.
Businesses can also join the Workplace Charging Scheme (WCS), which covers up to 75% of the cost of installing charge points for electric vehicles. The aim of the voucher-based scheme is to help employees charge their cars and increase the availability of overnight charging for business fleets.
You can apply for the WCS grant even if your home is your primary place of work – as long as you’ve listed your address as your place of business with Companies House or HMRC.
Business grants for high-speed broadband
Project Gigabit is a government initiative providing ‘lightning-fast’ broadband across the UK. Costing a total of £5 billion, the first phase of the project focuses on homes and businesses in ‘hard to reach’ areas with slower internet speeds.
Small and medium-sized businesses in these areas may be eligible for a grant of up to £3,500 to cover the costs of upgrading their broadband infrastructure. The funding can only be accessed through broadband suppliers registered as part of the scheme.
Because they’re considered to be a form of income, cash grants are usually taxable. You should report them on your tax return, whether you submit a Self Assessments or Company Tax Returns.
You may have to report a grant in the form of a voucher, discount or tax credit. It’s best to check with an accountant, HMRC or the fund providing the grant to make sure you report the grant correctly to avoid mistakes in your tax return.
There are lots of tools and websites to help you search for small business grants. A good place to start is the UK government’s database of finance and support schemes, which lets you filter by funding type, business stage, industry, number of employees and region.
Platforms like Grantify can help you check whether you’re eligible for a number of different grants, while also providing support with applications. Just keep in mind that most of these platforms charge fees or take commission.
And if you want to be notified of the latest grants and news, you could set up a Google alert for small business grants. To get the most relevant alerts, try using keywords to specify your area, sector or type of business.
Finding small business grants in England
The LEP Network is a network of 38 local enterprise partnerships (LEPs) across England. As well as playing a key role in setting local economic priorities, LEPs run ‘growth hubs’ that can help businesses get access to funding, resources and support.
Check out the LEP’s list of growth hubs in England, and get in touch with your nearest growth hub for further information about small business grants in your area.
Finding small business grants in Northern Ireland
Finding small business grants in Scotland
For grant opportunities in Scotland, head over to the Scottish Enterprise website. As Scotland's national economic development agency, Scottish Enterprise both provides its own grant funding and signposts to grants from their partners and external sources.
Finding small business grants in Wales
Check out Business Wales’ Funding Locator to find grants funded by the Welsh Government, local authorities, private businesses and lottery funds.
When you apply for a grant, you’ll often be up against some tough competition. Here are five tips for nailing your application and increasing your chances of securing funding.
Consider the eligibility criteria
A common mistake is choosing a grant that you’re not actually eligible for. Grant applications take a lot of work, so make sure you meet the eligibility criteria before investing your time. If you’re unsure, speak to the grant body.
Don’t wait until the last minute
Applications for small business grants often take longer than you’d expect, so give yourself plenty of time.
It’s also a good idea to apply as soon as the grant launches in case the scheme closes early or the pot of money is allocated before you get your application in.
Prepare your paperwork
To back up your application, you may need to provide documents such as financial statements, invoices, contracts or a business plan.
Try to get hold of this paperwork as early as possible, especially if you need to get information from a third party. Waiting for a response could slow you down and hold up the application process.
Be clear about how you’ll use the grant
You’re unlikely to secure a small business grant if your application is vague or doesn’t specify how you'll put your plans into action. Funding bodies like to see that you’ve considered every step and worked out detailed costs.
Check then check again
With so much competition, a simple mistake could cost you funding. And once a grant application has been submitted, you might not get the opportunity to make corrections or provide further clarification.
Before sending off your application, go back through it to make sure you’ve got your facts and figures straight and haven’t left out any key information. Consider asking someone else to take a look – two pairs of eyes are better than one.
You can generate financial support for your business in a few ways. But there are some key differences to consider when weighing up your options.
Business grants vs. loans
The main difference between grants and small business loans is that loans must be repaid, but grants do not.
Another difference is eligibility criteria. While grants tend to be awarded based on the impact they will have, loans are usually given out after considering a business’ financial profile and ability to make repayments.
Business grants vs. equity investment
Also known as equity funding or equity finance, equity investments involve exchanging cash for shares.
When deciding which businesses to buy shares in, investors typically look at businesses’ financial potential and the likelihood of getting a good return on their investment.
This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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