Grants & Loans

Grants

Grants are financial assistance for specific projects, eg the production of promotional materials or the restoration of a shopfront. The obvious benefits of grants are:

• they don’t have to be repaid, unless you fall foul of the grant criteria!
• they cover some of your project costs, so free up money to be spent in other areas of your business

However, grants have many downsides:

• they are only available in certain areas of the UK and must be used for a specific project – unlike loans, grants can rarely be used for working capital
• availability is limited, competition is fierce, and often no more than 20 or 30 businesses can receive assistance before funding is fully allocated for the financial year
• you will be expected to meet at least 50% of project costs out of your own pocket, so grants are not ‘free money’!
• the application process is often slow (three months and upwards in most instances) and it is unusual for grants to cover costs in excess of £5,000; often they will be for smaller amounts, usually between £250 and £1,000

Before applying for a grant you should carefully weigh up your options. If you need working capital then perhaps it would be better to apply for an overdraft. If you need money for a variety of business purposes, eg stock, equipment, etc, then perhaps a loan will be better. If you need tens of thousands of pounds, then you may want to consider venture capital.

Loans

Loans are not only available from commercial sources, such as high street banks; they are also available from business support organisations such as enterprise and development agencies. It is advisable that you ‘shop around’ and look for the best deal for your business. You may want to consider:

• interest rates, and whether they’re fixed or not
• the amount of security the loan provider requires
• repayment periods; and
• repayment ‘holidays’

The advantages of loans are that:

• they are widely available
• they can be for amounts up to £10,000 and sometimes much more
• they can be used for any business purpose; and
• the application process is relatively quick

The disadvantages of loans are that:

• they will only be offered to businesses that are seen as being viable in the eyes of the loan provider; and
• they have to be repaid!

Before applying for a loan you should look at the other options available to your business. If you need working capital then perhaps it would be better to apply for an overdraft. If you only need a small amount of money for a specific project, such as installing a security alarm, then you may be eligible for a grant. If you need tens of thousands of pounds and you are a limited company, then you may want to consider venture capital.

If you're looking for funding, don't forget to apply for the Shell LiveWIRE Awards for the chance to win either £1,000 or £10,000 for your business at:
www.shell-livewire.org/awards