There are numerous grants available to small businesses, start-ups and entrepreneurs in the UK, backed by the government and institutions established to develop certain sectors and regions. While grants are appealing, they are highly competitive. 

In this article, we explore what types of small business grants are available, where to find and apply for them and how you may qualify, plus the pros and cons to consider.
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What is a small business grant?

A small business grant is money given to a business through a specialist funding programme, which you’re not required to pay back, unless you breach any conditions in the lending criteria.

Grants are offered by the government, local authorities or private sector organisations that seek to boost growth and development in an area of innovation. Any small business that meets the qualifying criteria can apply, but you’re likely to be up against a lot of competition, as grants are highly sought after.

Most small business grants have a specific goal, such as stimulating job creation, growth, innovation or positive change in certain sectors or areas of the country. Therefore, they’re more than just an injection of capital that directly supports the business. Investments also serve to boost the local economy, which benefits the wider community.

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Types of small business grants available in the UK

At any one time, there can be hundreds of small business grants on offer in the UK, with new initiatives emerging all the time, serving different needs and agendas.

You can get grants for being an energy entrepreneur (especially clean energy), developing innovative tech, supporting educational needs, focusing on sustainability or developing breakthrough medicines or other research projects. In other cases, the government or local bodies may seek to spark growth in an area of potential or a region needing rejuvenation, or support an underserved community or demographic.

Below, we’ve outlined the main types of grants available in the UK, along with examples of each type of grant:

Direct government grants for small businesses

These are non-repayable funds offered by the UK government, Scottish Parliament, Welsh Assembly and Northern Ireland Assembly with the aim of encouraging growth, bringing wealth and creating jobs. 

Government grants for small businesses support SMEs in various aspects, such as expansion, innovation and sustainability. With direct grants, you may need to match the funding you receive with funds of your own.

Examples include:

• Numerous offerings from local authorities and industries that seek to reward ambitious companies seeking to expand, develop and innovate – see the list of available grants on gov.uk’s grant finder.
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Innovation grants

These grants aim to fund research and development, enabling innovative businesses to create and develop exciting new products and services, and ways to increase process efficiency in business. 

Examples include:

• Innovation Funding competitions through the government.
• Various innovation funding opportunities from Innovate UK.
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Start-up grants

There are grants designed specifically to assist new businesses in their early stages, covering key costs like equipment, planning, recruitment or marketing.

Examples include:

• Many of the governments’ grants support new businesses, and some target funding for start-ups looking to cover initial costs.
• Not technically grants, but the British Business Bank provides low-cost start-up loans of between £500 and £25,000.
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Sector-specific grants

The government and many industry bodies offer tailored funding for businesses operating within specific sectors to drive growth, innovation and modernisation.

Examples include:

• Grants through Innovate UK for projects focused on things like agri-tech and sustainable food, or healthcare advancements.
• Government funds to support economic growth and job creation for specific sectors and purposes.
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Grants for growth

There are grants available dedicated to growth, aimed at established businesses looking to expand, enter new markets and scale operations.

Examples include:

• The Growth Fund – this scheme funds growth projects that spark job creation and is part-funded by the European Regional Development Fund (ERDF).
• The government also offers advice for getting grants to fuel growth and securing funding privately.
• The Growth Impact Fund – an investment fund dedicated to social enterprises and projects/entrepreneurs seeking to support underserved communities.
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Sustainability grants

These grants help businesses to adopt green initiatives and environmentally-friendly practices and achieve net-zero goals.

Examples include:

• DRIVE35 Funding Programme – capital and R&D funding for the UK automotive industry to support the design, development and manufacturing of zero-emission vehicles.
• Sustainability initiatives to boost energy projects, like the SME Energy Efficiency Scheme (SMEES), or regional support for businesses to help them reduce carbon emissions, such as the East of England Low Carbon Innovation Fund. 
• Electric Vehicle Infrastructure Grant – funding for installing EV chargepoints and supporting the infrastructure involved for businesses.
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Education-based grants

These grants are aimed at businesses in the education sector, companies that provide training and development opportunities or new businesses needing support to train up new recruits. 

Examples include:

• Education and Skills Funding Agency (EFS) and apprenticeship grants.
• Higher Education Innovation Funding (HEIF) – supports knowledge exchange between higher education providers and various people and organisations. 
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Regional grants

There are various grants provided by local authorities or devolved governments that support businesses in specific areas. Local authorities are keen for cities and towns to thrive, and offering small business grants for local companies can help.

Examples include:

• Grants and funding specific to Wales, Scotland and Northern Ireland businesses registered and operating in these countries.
• Regional loans in the UK aimed at supporting economic growth and boosting the workforce in the area, such as the North of England Investment Fund.
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Who qualifies for a small business grant?

Numerous companies can qualify for small business grants, especially due to the wide range of grants available and emerging, each with specific eligibility criteria, often down to where your business is based and how and for how long it has been operating. 

Here are the main criteria by which your eligibility for a small business grant will be judged:

• Business purpose: Primarily, what industry sector are you (or will you be) operating in, together with the problem you’re trying to solve, and how much of a positive impact it can deliver.
• Location and legal status: Often, small business grants are down to location. Some areas receive funds due to economic conditions or high unemployment, and local councils run grants to boost growth in their area.
• Size: Many grants target new businesses and SMEs (usually under 250 employees), and there may be restrictions on business size. Also, some eligibility criteria involve turnover thresholds.
• Time in operation: Some grant schemes are only available to start-ups, while others are open to both early-stage and established businesses.
• Financial viability: Grant lenders seek to understand the viability of projects and often require detailed business plans, financial projections and details about current operations.

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Where to find small business grants in the UK

Grants for small businesses mainly come from the UK government, local authorities and industry development agencies. However, other organisations provide grants, such as charities, corporates and universities. Most can be sourced online. Below, we’ve outlined the main places to go to find a small business grant:

• The government’s dedicated business financing webpage: Finance and support for your business.
• Innovate UK – the UK’s official innovation agency that provides innovation-driven grants and competitions for R&D projects.
• Grant search apps, such as GrantFinder and GrantNav.
• The British Business Bank – providing details of government schemes and loans for businesses. 
• The Social Investment Business – a UK registered charity and trading company that offers loans, grants and other finance to charities and social enterprises.
• Other sources, such as local hubs, industry networking groups, social channels and peer networks and word-of-mouth.

Pros and cons of small business grants

While grants are very appealing due to the lack of requirement to repay the funds provided, plus other benefits to your organisation, they are highly sought after and come with strict eligibility criteria. The following table outlines the pros and cons of small business grants to consider:

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What if I can't get a small business grant?

If your business doesn’t meet the criteria for a small business grant, or you’ve applied for several grants and not been successful, fear not. There are various funding options you can use for a cash injection to fuel business growth, from investors to loans and growth finance solutions. 

Here are some popular alternatives to small business grants:

• Angel investors: High-net-worth individuals who invest their own money in exchange for equity in a company.
• Venture capital: Another equity finance option where firms build funds from various sources to invest in numerous companies with high revenue potential.
• Start-up loans: Smaller-sized debt finance options for start-ups to support early-stage growth, such as the British Business Bank’s dedicated start-up loan facility. 
• Friends and family funding: Gaining funding from within your personal network can give you more repayment flexibility, less time pressure or hoops to jump through, and sometimes interest-free lending. However, you run the risk of relationships souring if you run into any difficulties.
• Peer-to-peer lending: Platforms for businesses and investors to match and negotiate loan offerings and funding solutions.
• Flexible business loans: Short-term (often unsecured) loans that are quick and easy to access with flexible repayment terms tailored to business needs and cash flow.

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Business grants vs business loans

While business grants don’t require repayments, as outlined in our pros and cons section, there are drawbacks to consider, such as strict eligibility and rules on use of funds, slow application processes and high competition for awards. 

Business loans, on the other hand, especially unsecured loans from digital lenders, like iwoca, can provide fast access to funds (thanks to less stringent eligibility criteria and smooth online applications) with large sums available and flexibility of use.

Business grants are better suited to start-ups and new businesses, especially in innovative sectors and key locations primed for growth, and those with either less urgent needs or who don't want to take on a debt burden. If you need fast access to funds for short-term finance needs, specific asset purchases or cash flow management, seeking a business loan might be a better option.
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iwoca business loans for SME growth

At iwoca, we believe in allowing small businesses to fulfil their potential and reach their growth targets with quick and easy access to finance. Our Flexi-Loans are unsecured loans with manageable repayments tailored to business needs. 

You can borrow between £1,000 and £1 million for a few days or as long as 60 months. Apply in minutes, without the usual heaps of documentation and strict conditions, and get a funding decision within 24 hours.

We’ve helped over 150,000 businesses since 2012, providing flexible finance solutions for any business use and supporting start-ups, new companies and SMEs looking to move into their next growth stage. 

Find out how to apply for one of our business loans today or use our handy loan calculator to see your likely repayments.

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