Business Growth Grants

Business growth grants can help fund small and medium sized enterprises who have reached a point of expansion where they are seeking additional options to generate more profit. A capital injection can help businesses grow faster than relying on their existing financial resources. More often than not this non-repayable money comes from a Government source or other business support organisations.

What do they pay for?

Businesses may seek grants to cover a range of specific growth funding purposes, which are briefly outlined below.

• Market Research – Carry out competitor and industry research for new potential growth areas.
• Marketing Costs – Expand your branding and carry out online and offline marketing and advertising campaigns.
• Translation of Website – If you are looking to expand into new overseas markets you will need to prepare your website for the local markets.
• Product Launch – Develop, test, create and take to market a brand-new product line.

What’s the alternative?

If businesses cannot readily access a grant in their sector or region that fits their needs, then the alternative is to take on a repayable business loan. Business growth or development funding is typically accessed from a traditional lender, such as a bank or commercial finance specialist. There are a number of specialist loan products specifically designed for business growth.

Another alternative route to financing business growth is through peer-to-peer lending where a number of private lenders provide funding to a business with a proven track record through a P2P platform.

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.

• 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 a project, 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 where the money has gone and sometimes the grant is only released as a reimbursement after the project has been completed.

• It is harder for less established SMEs 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 see the project fail.

Loans – What are the Pros and Cons?

Advantages of taking a loan

• Loans will typically cover your entire project costs meaning you will not need to seek additional funding from elsewhere.

• Loan funding is flexible and can be used for anything in the business and there are typically no restrictions on what areas you may spend the money on that would otherwise be restricted if you were using a grant.

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

Disadvantages of taking a loan

• With loan you are paying the money back 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.

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

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