Grants for small businesses

Finding government grants for start ups can be like tracking down the golden fleece. But government finance for small businesses is available if you know where to look.

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Finding government grants for start ups can be like tracking down the golden fleece. But government finance for small businesses is available if you know where to look.

The government agencies involved make no apology for the difficult application processes involved in getting grant funding. This is partly put in place to test the need that the applicant has for funding. Grant aid in the UK does not come strictly under the control of the Government. In fact, it is regulated through EU ‘state aid’ legislation, which only allows the government to support certain types of business or activity.

One common misconception about grant funding is that there is a huge range of funding provided by the EU. In fact, the EU’s grant activities limit themselves to public-sector funding.

A firm’s location will play a major role. Companies located within an assisted area have a wider selection of grant funding schemes available to them and, in some cases, the funding available under schemes is higher in the assisted areas.

The assisted areas of the UK are based on three “tiers” relating to the maximum funding contribution that can be provided under different schemes.

What activities can gain grant support?


The provision of funding for R&D is increasing. An important distinction is between research into new products and processes (grant support is available) and continued development of an existing product or process (grant support is less likely).

Support for companies is now widely available through the R&D tax credit, which can be considered as state aid by the EU. This is an important distinction because care must be taken by companies seeking to gain grant funding in addition to a tax credit.

There is a National Grant for R&D (SMART in Scotland and Wales) aimed principally at SMEs, but grant schemes for R&D are being introduced all the time. Yorkshire Forward, for example, has introduced an R&D scheme for large companies based in Yorkshire.

There is also a large pan-European grant regime called ‘Framework 6’ which is available to companies involved in collaborative R&D projects with other companies and universities across Europe.

Employment and training

Government funds are now typically aimed at ‘training providers’ that can undertake the training. This activity is organised by the Learning and Skills Council.

Employment and training funding may still be gained in some areas of the UK through the regional development agencies or other economic development agencies. This is usually linked to certain categories of employees (typically dependent upon age, previous employment status and level of qualification).

The government also subsidises the employment of high-priority employee categories through the New Deal.

Environmental grants

The EU makes provision for national governments to provide funding under environmental schemes and provides some environmental programmes directly. Environmental grant schemes are typically for small amounts of money, but this will depend on region.

Capital investment in the assisted areas

There is a substantial grant scheme in the UK for SMEs, which is available to any company making an investment in an assisted area that also creates or safeguards employment. The scheme is called Selective Finance for Investment (SFI) in England, and a variation of the scheme is called Regional Selective Assistance (RSA) in Wales and Scotland. A related but simplified scheme also exists in Northern Ireland. Companies seeking the grant funding must offer an explanation demonstrating why the grant will allow the project to proceed in the UK.

They must also identify the amount of grant, which will be necessary for the project to proceed. The government will not pay more than a set percentage of the eligible capital expenditure. This can be up to 35 per cent in Liverpool, 20 per cent in Glasgow and 15 per cent in Manchester.

These are legally enforced limits and the government also limits the amount paid per job created. The UK average is £5,000 per job, although this may vary depending on sector: a pharmaceutical R&D environment might be awarded £10,000 per job.

Real estate development

Where companies are undertaking real estate development but the end value of the project will be less than the cost of development and construction, it is possible to gain grant funding to meet the difference (within set limits).

The gap between cost and value might arise because of contaminated land or difficult ground conditions but the gap may also exist because of market failure in areas of deprivation.

Increasingly, this is being used only for regionally important development projects rather than multiple small building schemes.

This article was written by Ernst & Young Director Nigel Wilcock and was originally published in Masterclass magazine. Wilcock specialises in regional development work and is an expert on government funding for corporate investment.

Further reading on government grants:



Comments (13)


All I want is to raise a small amount of money to start a Picture Framing Business. I owned a succesful one in South Africa, Which I sold as a going concern Six years ago. I would like to start another here. Can someone advise me?


For anyone seeking grant aid for their business, a good place to start is with the 'lead body' for the sector the business is in. There's a representative organisation (or lead body) for almost every business type and sector. It might be the 'Worshipful......whatever' or the 'Association of.....whatever'. They'll usually have information to begin with. Another organisation to think about is the Sector Skills Council. Again, there are SSCs for almost all industries in the UK. Contact your local council and Chamber of Commerce as well.


Gordon, if you're still checking out this site, have you tried the Arts Council or the Design Council?; The Design Council doesn't give grants per se but it can guide you if you look on their directory. Good Luck!


Hello, my name is Gordon Inverarity, I am an Ex-Offender I have all the equipment to start my own home based Ceramic Art Business, I completed a course funded by the Job Centre "Start your own small business" On completing the coure I aproached 3 high street banks only to be refused a loan by all three because I am an Ex-Offender and my unspent convictions.I would be grateful for any help, advice, or support in achieving my goal of rejoining society as a useful human being and being able to support myself.Thank You.G.Inverarity


Hi i'm enquiring on behalf of my dad he's a groundworker and facing redundancy this coming friday, He along with some other builders, electricians etc are thinking of going it alone instead of joining the dole queue does anyone know if he might be entitled to government grants? Thanks


Anyone know where we can get a grant from for our logistics company. Started up a few months ago and need a bit of financial help. We would like to employ a salesman to help generate sales however cannot afford the salary. We know this is the way forward for us. Any suggestions will be appreciated.


I need help in finding a grant to help create a new on-line lingerie store. Can anyone point me in the right direction or give me some guidelines of what we can apply for?


I need help finding a grant os some other source of money to start my business.
I need £4500. this will allow me to buy the necessary equipment. I already have invested about £4500 of my own money. But now there is a problem! A BIG problem. I have recently been disabled as a result of benign tumour being removed from my pelvic cavity. This resulted in my right leg having partial paralysis. I can no longer work as a van/truck driver. This job involved getting in and out of a truck to deliver meat to butchers, hotels & factories. It is impossible for me to continue doing this Job. I do not wish to stay on government benefits any longer than necessary. So the only way out I can see is to start up my own Photography Business. Is there anyone out there that can help me???
Thanks for spending the time to read this!


There are other sources of funding available. Please see the links attached below. Alternatively, have you tried asking friends and family for the money? This can often be a more reliable option than using overdraft facilities which could be taken away without warning. Best of luck!
Business Link


I am trying to start my own hairdressing salon and am working with the princes trust i was hopeing to get funding of £4500 from them but after months of hard work they have now informed me that due to a lack of funds the most they could make available to me is £2500 does anyone know where i can obtain funds to make up the shortfall?


Is small business grant available for starting vehicle repair/diagnostic services?
Thank you.