Applying for Grants and Loans

Start by contacting Business Link (a website published and maintained by the Small Business Service, an agency of the Department of Trade and Industry) if you're looking for funding.

Bank Loans

While you may be able to get an overdraft facility from a bank, which is useful for tiding you over when cashflow is tight, you may find you're unable to get a straightforward loan if you don't have enough security - in other words, you don't have anything that can be redeemed against the loan if you default on your payments.

It's inadvisable to offer your home as security against a loan because, if you fail, you risk losing the roof over your head. And if you have a mortgage, you may not own enough of your home to borrow against it anyway - until you've paid off your mortgage you only own a percentage of the property. 

Government Loan Scheme

Your bank may be able to offer you a loan under the government's Small Firms Loan Guarantee Scheme, if it feels that your business is eligible and relatively risk-free. The government guarantee covers 75% of new loans. Loans start at £5,000 and can go up to £250,000.

Business Angels

Business angels are individuals who invest small amounts in companies in the early stages of development. The National Business Angels Network comes under the aegis of the British Venture Capital Association, which publishes a directory listing all current sources of business angel capital.

Venture Capital

The government encourages individuals and businesses to invest in small-to medium-sized companies needing an injection of cash in order to grow.

The Inland Revenue gives tax relief to investors who provide venture capital. Nearly £23 billion has been invested in UK companies over the last 15 years. The British Venture Capital Association provides information.

Grants From Public Bodies

There are nearly 4,000 grants on offer in the UK each year. These are provided by all kinds of public bodies, ranging from local authorities and local and regional arts councils to central government and the European Union. Several publications give details of grants. These can be found in any good business reference library or bought from the Stationery Office, which has an online sales service, or try looking on the Internet for information - j4b Grants is a good place to start.

The amount of a grant is dependent upon a variety of factors and you will certainly have to find a sum of money yourself, as a grant never pays the whole cost of a project. Although there appear to be many grants on offer, getting a grant may take considerable work.

Companies called grant consultancies have sprung up to help applicants. There are various types of grant.

• A repayable grant is usually offered, interest-free, for special projects on the understanding that it will be repaid when the project succeeds, but not if the project fails.
• A direct grant is a sum of money that is given to a business - usually no more than 50% of a proposed project - and doesn't have to be paid back.
• Support in kind may take the form of free training, advice, professional services such as research and development, trips abroad for export planning, or something else useful for your business.
• A soft loan is made available to businesses not eligible for commercial loans. It may be interest-free, long term, or offer other benefits. It has to be paid back eventually.