Applying for a small business grant – everything you need to know

How to successfully apply for and spend a grant can be confusing for small business owners, especially those who are new to the world of grant funding.

Grants come from a variety of sources: public sector, private sector, universities and the government, to name a few. In fact, there are over 100 government grants available for small businesses UK-wide.

As most of the business population is made up of smaller companies, funding is in high demand.

Source: data.gov.uk

In a challenging funding landscape, cash-strapped small businesses are looking externally for this much needed funding. The latest SME Finance Survey found that 19 per cent of small and medium-sized businesses are looking to apply for government or local government grant funding in the next 12 months, making up the largest share of those applying for external funding.

To get you on your way to securing your grant, we’ll be exploring how to decide what to spend your grant on and how to maximise your chances of success. Alternatively, you can hop to the section that’s of most interest to you.

What types of grants are there for small businesses?
Where do I find the right grants for my small business?
What type of grant should I apply for?
How to decide what to spend your grant money on
How to increase your chances of success
Preparing for your grant application
The reality behind winning a grant
What you could spend £2,500 on
Alternatives to grants

What types of grants are there for small businesses?

Public sector: Grants that are controlled and funded by the government.

Private sector: Provided by firms that are not affiliated with the government and are privately owned.

Local council/local authority: Provided by your local council or local authority with a view to creating jobs, high street regeneration, support during difficult periods or making environmentally friendly improvements to your business.

University: Grants supplied by universities for current and ex-students, usually for an innovation project with a research element.

Competitions: Competitions are run to give small businesses the chance to win a grant. Winners are selected based on a set of criteria or can be selected at random.

Tax credits: While this isn’t a grant in the traditional sense, it’s still a way you can save money on your outgoings. Tax relief such as R&D (research and development) are available through HMRC provided you’re eligible.

Check Eligibility Today

Where do I find the right grants for my small business?

“It was an angel investor in the business who first sent me the link talking about the Xero Beautiful Business Fund,” said Layla Sargent, founder of The Seam, a platform that puts customers in touch with makers who can repair or tailor their clothing. “I then ended up meeting with her a couple of days later, and we spoke about it again. On the same day that I met with her, another friend of mine sent me the application as well. Then a couple of days afterward another friend sent me the application. In total, I received it from six different people.” The fact that she’d received it from so many contacts made it a no-brainer for her.

Sargent also contacts her network of entrepreneurs to find out if anyone else has experience of a particular grant and, more often than not, someone has applied for it before so can give her some pointers.

Though grant applications can be time consuming and off-putting, sometimes you just know that a grant is right for you and your business. Maybe it’s that it aligns with your values – like it did for Sargent – or perhaps it’s just a feeling or a practicality.

“I’d like to say that for each grant, we review them through a really structured process and we weigh up the pros and cons and the time that it should take and all of these things, but that wouldn’t be truthful. Instead, it’s much more instinctual,” she said. “[The Xero fund application] was also very short, which is important, because I’ve looked at so many funding grants and prize competition applications. When it’s long paragraphs of text, it can be really overwhelming and off-putting, whereas the Xero application was a video application and it was just 60 seconds long.”

You can see The Seam’s application video here

Do some research and find out if the company or body hosting the fund aligns with your values. “Last year we won the eBay Circular Fashion Fund. We decided to focus on that, because we understood that eBay’s intentions on a much broader level are aligned with The Seam.”

Sargent has email marketing for different industry publications, where they announce lots of funding, which helps a lot. She also follows government pages where they announce different types of grant funding. “I keep an ongoing list,” she said. “Lots of grants and competitions and funds are done on an annual basis. I try to just add to it every time I see something new come up.” She tries to stay as connected as possible, without drowning yourself in information. “Stay pinpointed in terms of the people that you follow – stay industry focused when it comes to email newsletters, for example,” she advised.

Anna Morrish, founder and MD of marketing agency, Quibble, had her network behind her in finding a grant after a long struggle. “It was a colleague and a friend of mine that told me about it said, ‘You want to try and grow the business. Is there anything that would be relevant for you as a service-based grant?’” There are other things she could have invested in, but it made sense for the business at the time.

In summary:

Stay in touch with your entrepreneur network
Research the funder’s values. Are they in line with yours?
Keep up with email newsletters and government funding pages
Find what you can, even if it’s not your primary funding project/goal

What type of grant should I apply for?

Have a think about what your business goals are and how much money you need. Remember that you don’t need to be wedded to one type of grant.

“We did apply for a mix of grants,” said Andrine Mendez, co-founder of GoPlugable, an app that lets people rent out their home electric car charging points to those living in shared accommodation. “Some of the university grants were more accessible, because you’re a student with an idea that you want to work on.” Queen’s [College, Belfast – where he and his co-founder studied] had a lot of programmes within the campus which supported these kinds of things. The other grants were based in Northern Ireland. Tech Start, which is funded by Invest in It allows businesses with an idea for a project to apply and there are different kinds of grants. There is a grant where you would validate your idea, which is £10,000. If you get that, the next stage is a £35,000 grant. “We actually got both, so it worked in our favour,” he said.

He added that depending on what business you’re in, there are a lot of government and local council grants that will be running programmes or competitions which small businesses are eligible for. “The competitions are called the cherry in the cake because you get the money upfront. As long as your business stands out and you have a business case, you get that money,” he said.

“I would say most of the grants and competitions are very upfront on their specifications. They tell you specifically what they’re looking for. There’s some fine print to read before you apply, for sure. When you’re applying for any form grants, look into that fine print – what exactly are the looking for?” he added.

Knowing where your business fits can narrow down an overwhelming search for funding. “We are a technology company. We know we fit into these grants. We are in the green tech mobility space, so there are a lot of conversations around that,” said Mendez. “If you’re a service company, or you’re selling something online, or you’re a traditional brick and mortar business, you need to understand which pockets you fit into.

“The competitions are called the cherry in the cake because you get the money upfront”
Andrine Mendez

“If you look at any regions, there’ll always be those pockets. For example, there might be certain areas within the UK whose focus is only on marketplace businesses, or who only focus on female-led business, who focus on ecommerce businesses. Always try to latch on to those areas, try to leverage that expertise.”

He also advises you to find a mentor. “That’s my definite go-to strategy, because you might find someone who has done something similar to what you’re trying to do. They’ve tried and tested things, so they will know ins and outs. Entrepreneurs like to help. Don’t be hesitant, don’t be shy, reach out to people and say, ‘I need help’. There’s nothing wrong with that.”

Extra support and ease may be a bigger driver for your grant, as Sargent explains:

“If there are prizes or competitions that are associated with corporations within your industry, or link to your industry, then prioritise these ones,” she said. “As well as the cash, they also can offer you strategic partnerships, introductions, guidance. So there are a lot of them, and a lot of competitions from large corporations. I would definitely prioritise these types of applications more than others.”

In summary:

Establish your business goals
Remember that you can mix and match grant types
Read the fine print
Know which categories your business fits into
Prioritise prizes and competitions that link to your industry
Find a mentor

How to decide what to spend your grant money on

It helps to have a specific project in mind that will improve your business. This could be improving your IT, hiring a new member of staff or developing a new product.

In the Xero competition, Sargent’s category was called Upskilling for the Future. “Inevitably, there are always going to be so many angles of the business and so much happening. But actually, the fund or the judges don’t want to particularly know about everything that your business is doing,” she said.

Bear in mind that you might be limited by industry, finances, geography, and more – location held back Morrish’s company, Quibble, based in Uppingham. “Usually, I struggled in the area that we were based in and it always seems to be on the county. [The grant] might be in Lincolnshire, or it will cover Leicestershire or Cambridge – we always get left out,” she said. “The grant I applied for was all about upskilling. There are a number of courses and online courses that our team were interested in. I was also looking at the time to get a mentor to try and get the company up to the next level. I was able to include the design of our new website which we’re in the process of building at the moment, with the design created externally. It was a 50 per cent [match funded] grant fund, so we had to pay 50 per cent and then they would fund the other 50 per cent.”

Project Proposal with stack of documents and keyboard.

As mentioned earlier, a friend had come to her suggesting a grant as it might help her to grow her business. “As we’re left out on so many occasions, I thought that we might as well go for it and see if we get something. Something is going to be better than nothing, even if it’s a case of just being able to upskill the team. You don’t know unless you try these things,” she said.

So, what should fellow small businesses focus on? “It depends on what goals they have. Every grant has asked for results. For ours, they said, ‘You must be looking at hiring somebody’, so at least one additional person. Then they asked for various results afterwards, because they’re looking to your financials,” she told Small Business. “They only want to fund companies that have either been going for a certain amount of time so that they can see that there’s actually some financial growth there.”

In summary:

Be specific about what you want to use funding for
Sometimes what you spend your money on can be restricted by location, industry or finances
Remember to honour what the funder is looking for

How to increase your chances of success

Grant applications can be taxing on a founder and their small business, taking their time and energy away from growing and nurturing their company. Never fear: there are ways around the practical side of applying.

Mendez found that, over time, applications have similar questions. After a few applications, it becomes a document, copy and paste job. “Between two founders, we have a document stored which has all these questions and all the answers,” he said. “We just grab it from there and go in.”

It also helps to find out which other companies got these grants, which is a good reference point to compare yourself to that business and figure out whether there’s a chance that you could get it.

“You need to have a good business model or a good idea, but you also need to have a story – it will attract that conversation,” said Mendez. “For us it’s about the team and the people behind it. What worked in our favour is that we had that background as students. My colleague was an engineering graduate, a female lead, which has a story of its own.”

How much you push the story out there counts as well. GoPlugable has invested a lot of time and money into having press and media interactions. “If you talk about the brand, or a person, chances are that the people who are going to read your application have already seen you, In its way, it’s validation,” he said.

Finally, get out there and meet these people if you can. “Whenever we apply for a grant, we don’t just wait for them to come back – we might reach out to those people, go back to them on LinkedIn and say that we’ve applied and we’re really curious or anxious about this thing. Don’t be pesky, but ask for help, be known,” said Mendez.

Of course, it’s useful to hear from the other side of the table. Small Business spoke to Alex Schirmeister, managing director of Xero UK & EMEA, and judge on the Xero Beautiful Business Fund competition, to find out more.

“It’s really tough out there for small businesses at the moment, so grants are an invaluable resource to help support their growth and innovation. We know how difficult it is to run a business, which is why we launched Xero’s Beautiful Business Fund to support small businesses in areas they want to grow, without having to endure the high cost of borrowing.

Smiling indian woman holding reading paper letter sit at table

“Above all, we want to see applicants showcase passion and personality. Genuine enthusiasm really resonates with the judging panel. Likewise, sharing the personal story behind the business adds authenticity and can help your application stand out.

“Grants usually come with specific focuses, such as job creation, community enablement, innovation or sustainability – filling the gaps that traditional lenders don’t cover. Competition is high for grants, so my advice would be to do your research and select grants that fit your business ambitions – giving you more time to create a standout application.

“It’s also crucial to be clear what the funding will be used for and how this aligns with the chosen grant category. Not including this makes it really hard for the judges to understand what impact the grant would have, regardless of how great the rest of the application is.”

In summary:

Have a bank of answers that you can use for multiple grant applications
Find out which other companies secured this grant to see if you could have a decent chance of winning it
Have a good story behind your business
Get in touch with the media to get your story out there
Reach out to funders if possible
Show passion and personality in your application
Apply for appropriate grants and be clear on how you’ll spend the money

Preparing for your grant application

At this stage it’s crucial to have your numbers sorted out. Your financials, as Morrish says, should be watertight. Your business plan should be solid too. Morrish didn’t have a business plan, so she had to get one together in a fairly quick fashion to make her grant application.

If you know anyone who has applied for this grant before, it’s time to get in contact. “We’ve worked with a number of clients that have went through the same grant that we did,” she said. “Luckily, because we’d already done it, we were able to assist them and say, ‘This is the stuff that is probably going to impact you the most’. If you don’t know the ins and outs, and the details in the recommendations, you might end up claiming for the wrong thing,” she said.

Also, if you haven’t done so already, establish how much funding you’re going for. Morrish says that the main problem she sees with other small businesses is that they go for too much grant funding. “At the end of the day, you still have to invest that money in your business, and you have to pay upfront as well,” she said. “When we applied for our grant, we had to say, ‘Okay, we’ve paid all this money, here are the receipts, now give us that money back’. We had to pay everybody that we were working with, in full, and then claim it back. You need to make sure that you’ve got that cash available and fluid, but also that you’re not asking for too much so that if that does happen, you’re not going to go bust.”

In summary:

Have your financials sorted out
Have a business plan
Get in touch with a business that’s applied for this grant before to get help
Be careful about how much funding you apply for

The reality behind winning a grant

So, you’ve secured grant funding. Fantastic! However, if you haven’t done your preparation, you may find yourself in a tough spot. This is especially true for match-funded grants.

“I’ve heard of people, I don’t know them personally, getting this grant money, and failing to meet the criteria and having to give it back,” said Morrish. “Then all of a sudden, you get this big bill at the end of it, because you’ve not fulfilled the criteria for the grant. It’s not just a case of free money. It’s so that you can grow your business, so you can create opportunities for people and grow the business and actually make a difference.”

Having the match funding is a non-negotiable, as Diane Gilpin, founder of Smart Green Shipping, knows all too well. As her business designs wind-powered shipping solutions, she applies for research and development (R&D) grants for the most part. The company has applied for funding from Innovate UK, the European Space Agency, and from Europe Horizon.

“I found grant applications very difficult initially as a small business owner, because I wasn’t able to get everything down to however many characters or words they needed it to be,” she told Small Business. “It was much more difficult for me to be succinct about it because I’m thinking everything is really important.”

Now she puts the questions into a PowerPoint presentation, then limits the number of bullet points that she can have in PowerPoint for each question. Then she can move the bullet points around. Like Mendez, she noticed a pattern within applications. “Generally, the first question is a bit of an overview, and then there’s a drill down,” she said.

The last grant that she applied for was an Innovate UK technology demonstrator. “I capitulated and then I spent however many dark nights doing all-nighters – but it was worth it because we won the grant,” she said. As Gilpin points out, most small business owners don’t do a lot of these types of applications. Universities and the larger blue-chip companies do, so they have a better eye for what will be successful. “You have to be very forensic about how your business does fit into the scope of the call. Otherwise, you can waste a lot of money,” she said.

The funding process tends to involve a briefing before Gilpin puts the questions in the PowerPoint, referring to the advisory notes from the organisers of the call to make sure she has all of the essential information in her application. “It will take me 10 days in total,” she said.

“It’s like filling in tax returns, squared”
Diane Gilpin

However, 10 days is a lot of time for a small business owner to take out. The time limit to apply adds all the more pressure. “They’ll put the call up on October 1, and you have to have it in by mid-November. You’ve got six weeks. You’ve got to use that 10 days whilst doing the other work, which is why you end up having to do a few all-nighters, which is really difficult.”

The key challenge is the rarity of 100 per cent funding grants and it can be difficult to demonstrate that you have the match funding. “There is an assumption on the government side which says we give you a significant chunk of the project costs in a grant, it will be easy to get the balancing investment – and it isn’t,” said Gilpin.

She thinks that there should be more connection with what the likely impact is of the product or the service that you’re developing through the grant. “People are saying we’re looking for projects that are going to address the climate emergency, but then they still fund you in a very ‘cash return’ kind of way. That’s the price, so how much return on investment there will be is the primary driver, even though it’s framed as being climate emergency stuff.”

All of this can be extremely off-putting for small businesses without the time and resources to deal the application and maintenance. It certainly has been for Smart Green Shipping: “The key reason why we have decided not to apply for funds has been around cashflow. We’re a small company and all of the working capital comes from our savings or personal pension funds. We win a grant for £4m, which is 70 per cent of the project costs, we managed to find the match funding, but we don’t get paid any of the grant funding until we’ve spent it.

“So, we are spending £1m a quarter, say. We have to pay that then we have to make an application to the government to pay the 70 per cent of the grant back. And however long that takes, that’s money out of our bank account. So effectively, we’re bank rolling the government,” said Gilpin. “They try to be quite prompt, but you might make an application around Christmas or Easter, and quite a lot of the civil servants who are processing it are all on holiday. There isn’t anybody that can pick it up. Just normal stuff. And I don’t think there’s any awareness within the funding bodies. That really exposes an SME, that’s really painful.”

Being a name in the tech and innovation space has been advantageous for Gilpin, but she has greater concerns for younger entrepreneurs. “I’m thinking of a young university start-up – they’re great scientists or they’re great technicians. And they go, ‘We’ve got £700,000’ and then the reality hits you. When the first quarter comes along, there’s not enough money in the bank to pay the bills. Then you have to go and borrow money at a high interest rate. Then you’re spending tons of time on the admin and finance. The project gets away from you,” she said. “That’s the biggest issue that needs to be highlighted for small businesses. I’ve seen lots of small businesses tumble at that and we’ve nearly done it.”

The first project that Smart Business Shipping got funding for was £100,000 and they got a £70,000 grant. They had to show the funders that they could get £30,000 out of their private savings. But it doesn’t stop there, as Gilpin explains:

“After you’ve won the award, there’s a presumption that you’re trying to diggle the government, that you’re not genuine. It just seems like that. So everything that you send in is gone through with a fine tooth comb. I mentioned the 70 per cent. We put in a claim, but they want to see all of your finances, which is reasonable, because they want to make sure you’re not going to go belly up any minute.

“You fill in a form about the 70 per cent, but you give them the accountants’ report for the 100 per cent. So, in the 30 per cent, where the advertising bid was, there was a £1 discrepancy. Now we’ve spent, £1m say, and we’re making our application for the 70 per cent of that to be paid back. So that’s £700,000. We send in the documents – £700,000 – all perfectly legitimate. For a £1 discrepancy, they made us do the entire accountants report again. We have a very, very good accountant who turned it around because it has to be independent. You have to pay for it. We got on to them, and they did it in a week.”

For businesses who are trying to get funding for a project, this can be incredibly deflating. “It just feels like you’re forever justifying the fact that you’re existing, you’re having to demonstrate that you will not be cheating,” said Gilpin. “It feels like an asymmetric relationship, it feels like we’re begging them for money. They seem to be trying to catch us out all the time, which is what I refer to it as the ‘gotcha’ thing.”

So, what advice does she have for small businesses applying for match funding? “Go in with your eyes wide open. There are some good bits about it. I think if you are a small business, there are grants that are useful and there are grants that are less useful. You have to be very selective about what you choose.”

She advises against bid writers because they’re expensive and don’t know your business as well as you do.

“Look at when the cash comes in so that you have the ability to manage it – I think that’s the biggest danger,” she added. “And be aware of the amount of administrative requirement you’ve got in order to get to unlock the money. Finding the investment, and then reporting monthly or quarterly is very time consuming, producing accountants, reports, filling in all of the funding application. It’s like filling in tax returns, squared.”

For this reason, it might be worth going for a smaller grant or a competition, especially if it’s your first one. Layla Sargent commented that the Xero competition didn’t require as much reporting, but you may have to agree to media appearances as a prize winner.

In summary:

Be sure you can raise funds for a match-funded grant
Put your application questions into PowerPoint and limit to bulletpoints for brevity
Deadlines are tight. Make sure you have enough time to devote to it
You may have to rely on personal finances to demonstrate match funding
An accountant will be useful
It’s a long and deflating process. Ensure you know the implications before you apply. Another type of grant may be more suitable if you are at an earlier stage in your business

What you could spend £2,500 on

With a £2,500 grant, you could:

Boost your marketing strategy
Create or revamp your website
Install energy efficient lights
Introduce sustainable technologies
Accessibility improvements
Expand into a new market
Purchase equipment
Improve your shopfront
Get freelance support

Small Business Pro, our all-in-one solution, can save you time and money as well as offering peer support and the chance to win a monthly £2,500 grant. It will also help with the heavy lifting of managing customers, taking payments, insurance, finance and HR, plus you’ll get a host of personal wellbeing benefits.

You can find out more about Small Business Pro here.

Alternatives to grants

If you’re rethinking grants and considering alternatives, you’ve got a few options:

Equity finance (such as SEIS and EIS) is worth a look, as are loans, purchase order finance or trade credit (a short-term unsecured debt).

Mendez suggests crowdfunding – if it’s suitable for your business. “Is it a business which customers or people who might use it might want to fund it upfront? That’s a pretty huge way of raising money these days,” he said. “Second, there might be some form of angel funding. The UK obviously has a lot of these instruments to help entrepreneurs or start-ups raise money through angel investors.”

Gilpin puts in another vote for angel investors. “They have been amazing. It’s not always easy to get that, but we have met some fabulous people who have been really supportive of us. That’s the best money to get if you can get it, because you will get input from those people as well. They’ve done it several times, so they will advise you.”

Anna Jordan

Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business. More by Anna Jordan

Applying for a small business grant – everything you need to know

We'll take you through what type of small business grant you should apply for, how to prepare and how to increase your chance of success.

What types of grants are there for small businesses?