Building and Renovation Grants

Building and Renovation grants can help fund businesses who want assistance with new building projects or renovation and relocation activities. A capital injection can help businesses carry out building or renovation activities sooner or carry out more sophisticated developments than they would have relying on existing financial resources. More often than not this non-repayable money comes from a Government source, local authority or an enterprise support hub.

What do they pay for?

Businesses may seek grants to cover a range of specific building and renovation purposes, which are briefly outlined below.

• New Build – Funding to help carry out a new commercial construction development
• Building Expansion Projects – Funding to extend or expand an existing commercial premises
• Building Refurbishment – Funding to carry out improvements to older premises or add specialist facilities, such as changing rooms
• Relocation – Funding to relocate to a new location for growth and expansion or strategic purposes
• Shop Front – Funding to renovate and make a shop front more desirable to attract new customers

What alternative funding is available for buildings and renovation?

If businesses cannot readily access a grant in their sector or region that fits their needs for building and renovation then the alternative is to take on specialist loans, such as commercial mortgages. This finance can either be accessed from a traditional lender, such as a bank or commercial property finance specialist.

There are also a number of alternative financing options to small businesses seeking a loan for building and renovation, which include:

Property Development Finance – short term property development loans can be accessed from P2P lenders or loan brokers and are quicker to access than commercial mortgages

Bridging Loans – This is another type of short-term loan that can be accessed from specialist lenders and accessed quicker than commercial mortgages

What are the pros and cons of a loan vs a grant?

Grants – What are the Pros and Cons?

Advantages of taking a grant

• Grant funding is non repayable and means there is no pressure on business cash flow moving forward compared with repaying loans and their associated interest.

• Grant funding typically targets specific areas of business and can allow you to explore and expand new areas of your operation that previously have not been developed and made more efficient with new premises or additions to existing premises.

• If you are awarded a grant from a government backed scheme or enterprise support body, this is considered a vote of confidence from the awarding body in question and means they have backed your business proposition as one that is highly likely to succeed. Details of your receiving an award is often publicised in local press or trade publications and this can be used as a promotional tool to secure new business.

Disadvantages of taking a grant

• Grants usually only offer a percentage of total funding needed for new buildings or a refurbishment, in many cases in the UK match funding of 50% is typical.

• Access to grants is highly competitive. As the money is free you will be competing against other businesses and will need to stand out from the rest of the applicants to be awarded funding.

• Grant funding pots are often restricted to specific sectors or regions, so it means if you do not operate within that sector or geographic region then you are not able to access the funding. Some areas and sectors have less funding than others.

• Grants often come with terms and conditions and restrictions, which means you are only allowed to spend the money on what you specifically applied for. Evidence must be provided to show what building materials have been purchased or construction labour costs. Sometimes the grant is only released as a reimbursement after the development activity has been completed.

• It is harder for unestablished smaller businesses to access money from grants. More often than not a business needs a track record to prove they will make good use of the money and not waste money by carrying out unnecessary building development activity. Some schemes will only accept businesses with up to 2 years of trading records as evidence.

Loans – What are the Pros and Cons?

Advantages of taking a loan or commercial mortgage

• Loans and commercial mortgages will typically cover your entire building development costs meaning you will not need to seek additional funding from elsewhere.

• Loans and commercial mortgages are flexible and can be used for any planning approved developments for the business and there are typically no restrictions on what areas of renovation you may spend the money on that would otherwise be restricted to specific means if you were using a grant.

• Loans and commercial mortgages are not limited by sector and means that certain businesses traditionally excluded from grant opportunities, such as cafés and retail outlets, can more easily access this type of finance to update their premises.

Disadvantages of taking a loan or commercial mortgage

• Whenever you take out commercial mortgages or loans, you must always make sure you can keep up with the monthly payments over a period of time with interest and this can put a strain on business cash flow in the future if trading conditions become tough. You also risk losing your commercial property if you cannot keep up with payments on collateral backed mortgages.

• There are some cases where loans and commercial mortgage interest rates for less established businesses can be higher due to the greater level of risk for those without a proven track record. Businesses with a good relationship with their bank can typically negotiate to get a better interest rate on repayments.

• If you are trying to seek a loan or commercial mortgage when your business is already facing financial difficulties, there is a chance that you may be refused if your business is deemed too high a level of risk. Access to traditional commercial mortgages and loans can also “dry up” when there are difficult economic conditions taking place across the UK.