Loans and Grants for Start-ups

When you’re starting a new business, funding can be a huge pressure point. Trying to figure out how you’re going to pay for initial start-up costs and actually saving up to take the plunge are two of the biggest reasons why many are so reluctant to get going with their big business venture. But did you know there are a number of loans and grants for start-ups available to help you get off to a great start?

Funding for small business start-ups

From direct grants to loans for start-ups, there’s loads available to help you get started! However, it’s worth reviewing your eligibility before you put all your eggs in one basket. Here’s the different types of small business start-up loans and grants you may encounter:

Direct grants for start-ups

Direct grants can be awarded to new businesses to help you get started. These grants may be given with the intention of it covering costs of things like training or equipment. Where you won’t need to pay a grant back, some will require you to invest the same amount into your business, so if you’re looking for a grant of £10,000, be prepared to invest £10,000 too.

Loans for start-ups

There’s a great variety of loans for start-ups and all will have different requirements, so it’s worth really reviewing these to try and find the best match for your business. A few examples of the loans you may expect to see are:

  • Equity finance: this is where you sell a share of your business and get finance in return.
  • Soft loans: these are loans with lower interest rates, some of which are backed by the government, such as the Start-up Loans Scheme.
  • Short term loans: intended for a quick sum of cash to help your business, terms can be anywhere between a month to 2 years.
  • Long term loans: usually larger sums of money or those with lower monthly repayments that are paid off over many years (anywhere between 3 – 20).
  • Variable loans: repayments will fluctuate depending on the market rate, this means sometimes payments may be cheaper, but they can also increase too.
  • Fixed-rate loans: with these types of loans your repayments will be set for the length of your contract so you’ll know exactly how much your monthly repayments are.
  • Working capital loans: these loans are designed to fill any financial gaps your business has; these can be great short-term solutions.
  • Asset financing: asset-based lending is where things your business owns are used to free up capital, this can be anything from property to vehicles to stock.

How do I find funding for small business start-ups?

Luckily, it’s quite straightforward to find loans and grants for start-ups. Use the government’s business finance finder and regional funding portals to search for grants and loans specific to your business and needs.

How do I get a start-up grant?

As you can imagine, start-up grants can be highly competitive, but we’ve got some handy tips to help give you the best chance when you’re applying:

  1. Check carefully before applying to make sure you meet all the terms and criteria. Certain grants are very specialist and will only cover a certain industry, whereas other grants may only be used for a specific goal such as buying equipment.
  2. Talk to the awarding body of the grant. If you’re unsure whether you meet the requirements, ask! They’ll be able to tell you if your business is what they’re looking for.
  3. Carefully read the objectives. Most start-up grants will have specific objectives which could be anything from increasing jobs in the community to certain environmental initiatives. When you put in your application, you’ll need to make sure your business matches these objectives to stand the best chance.
  4. Make sure you have a strong business plan. Most grants will expect to see a business plan – loans will too – so you’ll need to make sure this is ready to impress. If you’ve already started trading and are profitable, examples of your positioning and a balance sheet won’t hurt too.
  5. Check if there’s an investment required. As we said before, sometimes the grant will expect you to match their funding.
  6. Get in early! Apply for the start-up grant as soon as possible as you’ll want to get in before the money runs out.

And that’s it! If you follow the tips above, you’ll be onto a great start with your start-up grant application.

Looking for more financial advice and accounting help? Read our guide on essential accounting advice for small businesses, next.