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What Government Grants and Loans are Available for UK Businesses?

Government Grants and Loans

Introduction

After the financial crisis, many businesses have found it harder to secure loans and lending, which has made it difficult for fledgeling companies to grow.

Thankfully, regardless there is a lot of help still available from many different places.

For instance, although banks may have tightened their lending, things like government grants and schemes often say yes as long as you have a watertight business plan.

In this guide, you’ll find out everything you need to know about government grants and loans for businesses, including what they are and examples of them around today.

What’s in this guide?

Government startup loans company

Startup Loans Logo

Type: Government Loan

Loan amount: £500 – £25,000

Interest: Fixed 6% interest p.a.

Loan term: 1 year to 5 years

Government loans are loans that are funded by government-backed organisations, who usually offer either regional or national businesses different loans depending on their location.

With this loan, in particular, it is aimed at startups less than 24 months old who could benefit from not only finance but mentoring, to help your business grow and thrive.

Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,721.33 a month, with interest of around £655.94. Total amount payable is £20,655.94.

Company rating on Trustpilot: 5 / 5

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FAQ

What are Government Grants and Loans?

The government offers these grants and loans both regionally and nationally, but more on that in the section below.

Grants can give your business from £1,000 to £100,000 if you are a small to medium-sized enterprise (SME), but it can be unlimited if you have a large company thanks to EU state aid programmes.

Plus, with grants, you don’t have to pay the money back.

Though, it’s worth noting that if you are misleading with your claims about your businesses outcomes, there might be ‘clawback terms’.

In this case, you might have to pay back your grant money in certain situations.

Sometimes grants can also only be available to specific industries; for instance, the Advanced Manufacturing Supply Chain Initiative – West Midlands and Liverpool is focused explicitly on automotive and aerospace projects in the West Midlands.

The grant application process can be very long because of these specific requirements. So it shouldn’t be a substitute for loans.

Government loans like the BCRS Business Loans from the BEIS (Department for Business, Energy & Industrial Strategy) allow you to borrow from £10,000 to £150,000 with a repayment term of between one and seven years.

In this instance, you need to be able to prove that a bank rejected you for a loan; which in a way is good as you know you’ll have a potential backup in that scenario.

Are there free government grants?

Yes, you don’t have to pay back government grants at all.

However, a government loan acts the same as a normal loan, in the sense that you have to repay the money you have borrowed.

Are there regional grants?

As stated previously, grants and loans can either be regional or national.

This is so certain areas of the UK encourage local businesses to grow. Which consequently usually means more jobs for local people and helps the economy.

For instance, taking the BCRS Business Loans as an example, offer to finance for businesses specifically in the West Midlands that may have been unable to get funds from traditional lenders such as banks.

They offer every business a Business Development & Lending Manager to develop your application.

This means that they don’t use impersonal things such as credit scores. So you can talk to a person that can give you advice for your business and your loan application.

These loans are available to most markets including construction, engineering, IT services, manufacturing and wholesalers for example.

Many businesses in the West Midlands can benefit from this regional loan. Whereas there are other national grants and loans such as Big Issue Invest UK which covers all of the UK.

Big Issue Invest UK national loans offer social enterprises and charities funding. So, even if your business isn’t for-profit, you can still find a loan to get your business off the ground.

What is an example of a government grant?

For small and medium-sized businesses in Cornwall and the Isles of Scilly, there is a grant called Agri-tech Cornwall.

This is a £10 million initiative to drive research, development and innovation in the agricultural industry.

In other words, helping to do things such as developing new technology. And, applying it to the natural environment and helping those who farm it.

They are financed by the European Regional Development Fund and its lead by the Duchy College Rural Business School with other top tier institutions.

A project that has been developed using this fund is Fabsoil, which is the creation and study of soil that is made from recyclable materials, which will lead the way to customisable grounds.

What is an example of government loans?

When it comes to loans, there are things such as the Business Growth Loans which cover the areas of:

  • Sussex
  • Kent
  • Surrey
  • Hampshire
  • Essex

Which allows businesses with up to 249 employees that have been trading for 12 months or more borrow from £3,000 to £50,000.

This can go towards anything business related, like paying for new equipment or employing people to help your company grow.

With the start-up loans from the same business, you can get funding and support. Which includes mentoring to help you develop the future of your company.

Advice & Support

For some businesses, having advice and mentoring from experienced companies can be worth just as much as potential funding!

It can help you to develop your business, work on your business plan, come up with reasonable financial projections and find premises for your company.

CompanyTrustpilot ScoreLoan AmountLoan TermTypical APR
Government Startup LoanN/A£500 – £25,0001 to 5 years6%
Funding Circle★★★★★£5,000 – £500,0006 months to 5 years4.50%
Capify★★★★★£3,500 – £500,0006 to 10 months67.89%
Shawbrook Bank★★★★★£250,000 to £25 millionBespoke0% to 19.9%

Top 3 Pros and Cons

✔ Government loans are fixed, and you won’t pay additional fees.
✔ You can get up to 12 months free mentorship.
✔ As this is unsecured, you won’t have to put your home or other assets up for collateral.

✗ You need to be a startup business with less than 2 years of trading history.
✗ Government loans typically mean you need to borrow less.
✗ This is technically a personal loan, so it will be your responsibility to pay it back.

Top 4 alternatives to a government loan

1. Boost Capital

Boost Capital Logo

Type: Alternative Finance Provider

Loan amount: £3,000 – £500,000

Typical APR: 1.5% – 2.5% monthly APR

Loan term: 4 to 18 months

Boost Capital is a highly recommended alternative finance provider in the UK, with many customers giving this lender five stars on trusted websites such as Trustpilot.

They offer fast funding, with minimal paperwork, approval in 24 hours and access to your funds in around two days.

Representative: Borrow £10,000 for 12 months at 47.9% representative APR. Interest rate of 36.74% p.a. (fixed). Total amount payable is £12,100.

Company rating on Trustpilot: 5 / 5

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2. Capify

Capify Logo

Type: Alternative Finance Provider

Loan amount: £3,500 – £500,000

Typical APR: 67.89% APR

Loan term: 6 to 10 months

Capify is another highly rated lender, who has been around since 2008 and they have helped thousands of business owners to grow and sustain their business.

Focused on small to medium enterprises, they aim to give you a decision within 60 seconds and solutions tailored to your business.

Representative: Borrow £24,000 for 12 months at 67.89% representative APR. Total amount payable is £29,472.

Company rating on Trustpilot: 5 / 5

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3. Funding Circle

Funding Circle Logo

Type: Peer-to-Peer Lender

Loan amount: £5,000 – £500,000

Typical APR: Rates start from 4.5% per year AER

Loan term: 6 months to 5 years

Funding Circle is one of the peer-to-peer lenders that have been sprouting up around the UK in the last few years.

With a peer-to-peer platform, the lenders are regular citizens that want to help their savings grow by investing in UK businesses.

For businesses, this means low AER and only a couple of extra fees.

Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,752 a month, with a completion fee of 2.5% and interest of around £526. Total amount payable is £21,026.

Company rating on Trustpilot: 5 / 5

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4. Shawbrook Bank

Shawbrook Bank Logo

Type: Bank

Loan amount: £250,000 to £25 million

Typical APR: 0% to 19.9% APR

Loan term: Bespoke repayments

Shawbrook Bank offers their business customers a range of services tailored to their companies, like asset finance, working capital solutions, the point of sale finance and structured finance, as well as commercial mortgages too.

This means that for startup businesses you could finance for the road ahead with equipment and salaries, or even established companies can benefit from more substantial amounts to help you fund expansions.

Company rating on Trustpilot: 5 / 5

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The top five business loan providers take into consideration their customer reputation, the amount you can borrow and the typical APR or interest rates, to ensure that you’ll be getting the best deals for you and your company.

Conclusion

For startup businesses, government loans and grants can mean the difference between launching your business to it’s best potential or struggling in that essential first year.

Not only can you get the funding that you require to thrive, but you can also benefit from the huge amount of advice and mentorship that could potentially be on offer.

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