Government Grants for Small Business

When you’re starting a business, investing in growth, or launching a specific project, securing affordable financing can be a major stumbling block. 

Small business grants can reduce that pressure by providing funding that usually does not need to be repaid. However, schemes are often competitive and may come with strict eligibility, spending, and reporting requirements. 

To improve your odds of successfully securing the funding you need, start by understanding the types of grants available, who can apply, where to find funding, and how to prepare a stronger application.

Here’s what we cover:

What are small business grants?

A small business grant is non-repayable funding awarded to eligible businesses for approved projects, activities, growth costs, or specified expenses. 

Unlike a loan, a grant usually doesn’t need to be repaid unless it was obtained fraudulently or its conditions were breached. 

A range of schemes is available to support small and medium-sized enterprises through the start-up and growth stages. Grants are typically designed to encourage certain business activities, support government priorities, or address recognised funding gaps. Eligibility and permitted uses may depend on: 

• Your business type, size, or sector. 
• Where your business is based, sometimes down to the county, city, or town. 
• The activity or project you plan to fund. 
• Whether you agree to meet conditions such as recruiting local employees. 
• Whether you can contribute some of the project’s cost yourself. 

For instance, a grant might be offered specifically to help a business improve its broadband connection or to expand by hiring employees from the local area. 

The government funds many UK business grant schemes, while local authorities and other agencies administer them and establish their conditions. Universities, industry bodies, and other institutions may also offer their own funding programmes. 

Grants are generally provided in one of two ways: 

• Direct funding: the grant covers the approved amount, subject to the scheme’s limits and conditions. 
• Matched funding: your business contributes a proportion of the project cost and must demonstrate that the remaining finance is available. 

The benefits of government grants for small businesses

Government grants can help small businesses fund growth, reduce financial risk, and pursue projects that may otherwise be difficult to afford. 

Unlike a loan, grant funding does not usually need to be repaid, which means it can support investment without adding monthly repayments or increasing business debt. It also allows owners to retain full control of their company, unlike equity investment, which may require giving an investor a share of the business. 

Other potential benefits include: 

• Improved cash flow: grant funding can reduce the amount of working capital a business must commit to a project.
• Lower investment risk: a grant can make it easier to test a new product, enter a market, or adopt new technology without carrying the full cost. 
• Faster business development: funding may allow a business to recruit, train staff, buy equipment, or complete improvements sooner than planned. 
• Greater credibility: receiving competitive funding can demonstrate that an external organisation has reviewed the project and considers it viable. 
• Access to additional support: some programmes include mentoring, specialist advice, research partnerships, or networking alongside the financial award. 
• Potential to unlock further finance: a grant can make a project more attractive to lenders or investors by reducing the amount of external funding still required. 

Grants can be particularly valuable for projects that offer long-term benefits but may not generate an immediate financial return, such as research and development, staff training, or energy-efficiency improvements. 

However, businesses should still assess whether a grant is right for the project. The time required to apply, any matched-funding contribution, and the conditions attached to the award should be weighed against the value of the support. 

Which ventures are eligible for small business grants?

Eligibility depends on the individual grant; funding is generally available to UK businesses that meet a specific grant’s location, size, sector, and project requirements. 

Grant providers may assess factors such as: 

• Where your business is based 
• How many people you employ 
• Your annual turnover 
• How long your business has been trading 
• The sector or industry you operate in 
• Whether you are a start-up, growing business, or established company 

Your proposed project must also align with the purpose of the grant. For example, a scheme designed to improve energy efficiency may only fund equipment or building improvements that produce measurable energy savings. 

Some grants require matched funding, meaning your business must contribute part of the project cost and demonstrate that the remaining finance is available. 

You may also need to show that your business will: 

• Use the money only for approved expenses.
• Complete the project within the required timeframe. 
• Track how the funding is spent. 
• Report on agreed outcomes, such as jobs created, emissions reduced, or productivity improved.
• Retain invoices and other evidence for auditing purposes. 

Meeting the basic eligibility criteria doesn’t guarantee funding. Many grants are competitive, so your application will also need to explain why the project deserves support and how it will deliver clear, achievable results.

What are the different types of small business grants?

Types of small business grants include ones focused on start-up businesses, growing existing ventures, backing innovation, supporting hiring and training employees, improving energy efficiency, and funding business in certain sectors or ones looking to begin or expand export operations. 

Some small business grants are nationally applicable, while others are only available in certain local authorities or regions. 

Here are a few of the main grant types available from the UK government and other official bodies:

Start-up and business growth grants 

Start-up and business growth grants help businesses cover the costs of launching, expanding, or improving their operations. 

Depending on the scheme, funding may be available for: 

• Buying equipment, machinery, or technology. 
• Improving commercial premises. 
• Developing new products or services. 
• Increasing productivity. 
• Entering new markets. 
• Creating jobs. 
• Paying for professional advice or consultancy. 

Some grants are limited to new businesses, while others are designed for established companies with clear growth plans. You may need to provide a business plan, financial forecasts, and evidence showing how the funding will contribute to measurable results. 

Innovation funding grants

Innovation grants support businesses carrying out research, developing new technologies, or bringing new products and services to market. 

They are commonly available to businesses working in science, engineering, manufacturing, digital technology, and other research-led sectors. Funding may cover activities such as feasibility studies, product development, testing, prototyping, and collaboration with universities or research organisations. 

Innovation grants are usually competitive. Applicants may need to explain what makes their project innovative, demonstrate its commercial potential, and provide a detailed plan for completing the work. 

Some businesses may also be eligible for research and development tax relief alongside grant funding, although the rules governing how the two forms of support interact should be checked carefully. 

Employment, training, and apprenticeship grants

Employment, training, and apprenticeship grants help businesses recruit new employees, develop workforce skills, and improve workplace practices. 

Funding may contribute towards: 

• Apprenticeship training. 
• Staff development and professional qualifications. 
• Recruiting people from particular age groups or employment backgrounds. 
• Creating new roles. 
• Improving workforce productivity. 
• Introducing new management or workplace practices. 

Eligibility may depend on the location and size of the business, the employee being recruited or trained, and the type of qualification or programme involved. 

Businesses should also check whether the funding covers the full cost or requires them to pay a proportion themselves. 

Green and energy-efficiency grants 

Green and energy-efficiency grants help businesses reduce their environmental impact and lower operating costs. 

They may support projects such as: 

• Installing solar panels or other renewable-energy systems. 
• Improving insulation, heating, or lighting. 
• Purchasing energy-efficient equipment. 
• Reducing waste or water consumption. 
• Introducing low-emission vehicles. 
• Measuring and reducing carbon emissions. 

Some schemes provide funding for an initial energy audit before contributing towards the cost of recommended improvements. 

Applicants may need to show the expected energy savings, environmental benefits, and financial impact of the proposed project. Matched funding is common, particularly for larger equipment or premises improvements.

Sector-specific and export grants 

Sector-specific grants provide targeted support to businesses operating in industries that are important to local or national economic priorities. 

Funding may be available for sectors such as: 

• Agriculture and rural enterprise 
• Creative industries 
• Manufacturing 
• Health care and life sciences 
• Tourism 
• Construction 
• Digital technology 
• Food and drink 

These grants may support specialist equipment, accreditation, research, training, product development, or improvements needed to meet industry standards. 

Export grants and related support are designed to help businesses enter overseas markets or expand their international sales. Funding may contribute towards market research, trade events, export advice, overseas promotion, or adapting products for new markets. 

Eligibility often depends on the business’s sector, location, export potential, and proposed use of the funding.

How to apply for grants and loans 

Applying for a business grant or loan usually involves proving that your business is eligible, financially viable, and capable of using the funding as proposed. 

The exact process varies between providers, but you may need to submit: 

• A business plan. 
• Recent accounts or financial statements. 
• Cash flow, revenue, and profit forecasts. 
• An explanation of how the funding will be used. 
• Quotes or cost estimates for planned expenditure. 
• Evidence that any required matched funding is available. 
• Details of the outcomes the project is expected to achieve. 

If the funding is conditional on a specific activity, you will also need to explain how you plan to meet that requirement. For example, a grant linked to local job creation may require a recruitment plan showing the roles you intend to create, when you will hire, and how you will find suitable candidates. 

Loan applications will also place an emphasis on affordability and repayment. Providers may review your credit history, current debts, trading performance, and projected cash flow to determine whether your business can meet the repayments. 

Both grant and loan applications can take time, so start early and gather the required evidence before the deadline. Follow the provider’s instructions closely, answer every question, and supply documents in the requested format. 

How to strengthen your grant application 

Your application should clearly explain the problem or opportunity the project will address, how the funding will be used, how this meets the eligibility criteria of the grant and the funder’s objectives, and what results it is expected to deliver. 

Before you begin your application, read the guidance carefully and check: 

• Which businesses and activities are eligible. 
• Which costs the grant will and will not cover. 
• Whether matched funding is required. 
• Which documents must accompany the application. 
• How applications will be assessed. 
• The submission deadline and project timeframe. 

Support your case with evidence such as market research, customer demand, financial forecasts, or information about the challenges facing your business. 

Include a clear, itemised budget that connects each expense to the proposed project. If matched funding is required, explain where your contribution will come from and provide evidence that it is available. 

Funders may also expect measurable outcomes, such as: 

• Jobs created or safeguarded. 
• Employees trained. 
• Products developed. 
• Energy use or emissions reduced. 
• Productivity increased. 
• New customers or markets reached. 
• Revenue or export sales generated. 

Keep your answers clear and specific, avoid unnecessary jargon, and make sure every part of the application addresses the assessment criteria. Allow time for someone else to review it before submission, and retain a copy of the completed application and supporting documents. 

What happens after you receive a business grant? 

Once you receive a grant, your business must use the money for the approved purpose and comply with any reporting, spending, and project-delivery conditions. 

Depending on the scheme, you may need to: 

• Keep grant funding separate from other business expenditure. 
• Retain invoices, receipts, and proof of payment. 
• Submit progress reports at agreed stages. 
• Provide evidence that project targets have been met. 
• Record outputs such as jobs created, training completed, or energy saved. 
• Notify the provider about delays or significant project changes. 
• Allow the provider to audit how the money was spent. 

Some grants are paid in instalments or reimbursed after eligible costs have been incurred, so your business may need enough cash flow to pay expenses before claiming them back. 

If the funding is used for unapproved costs or the grant conditions are not met, the provider may withhold future payments or require some or all of the money to be repaid. Review the grant agreement carefully and establish a process for tracking expenditure, deadlines, and outcomes from the beginning of the project.

Where to find small business grants in England, Scotland, and Wales 

Small business grants are available all over the UK through national funding bodies, local councils, regional support organisations, industry bodies, and research partnerships. 

Because funding programmes frequently open, close, or change their eligibility criteria, it’s worth checking several sources rather than relying on a single grants database. 

You can also use the government’s business finance support finder to filter schemes by support type, business stage, industry, employee numbers, and region. Check local and sector-specific sources as well, because some opportunities may only be promoted through the organisation administering the funding. 

Grants are not the only form of low-cost government support. Depending on your business structure and activities, you may be able to reduce your tax bill through business allowances and tax reliefs. Businesses undertaking qualifying science or technology projects should also check whether they can claim research and development tax relief. If you receive grant funding for the same project, confirm how it affects the costs included in any tax-relief claim.

Small business grants in Scotland

The following schemes offer funding to businesses in different Scottish regions and sectors. Availability and eligibility criteria can change, so check with the provider before applying. 

Small business grants in Wales 

Welsh businesses can access a mixture of national, regional, and local-authority schemes. Some programmes are limited to specific counties, sectors, or project types. 

Other ways to finance a small business

If your business can afford to repay funding, a loan or other finance option may be more suitable than waiting for a grant. 

These alternatives usually cover a wider range of purposes and are therefore easier to access. They also may allow greater flexibility over how the money is used. However, you will need to consider interest, fees, repayment terms, and the impact on cash flow before committing. 

The right option will depend on how much funding you need, what you plan to use it for, and whether your business can comfortably meet the repayments. 

Business loans

Like grants, loans are offered via a variety of institutions. It’s a mistake to think that banks are the only route for loans. 

Often, the deals from non-bank institutions are a better value than standard bank loans and are underwritten by the institutions to remove any barriers. 

This makes them available to businesses that may not have a good credit standing (perhaps because they’re new, for example). 

On the other hand, when it comes to getting a loan from a bank, as well as considering the traditional high-street offerings, take a look at challenger banks, too, as they might provide good options that meet your needs. 

In either case, you can easily keep any necessary business records to help support your application with accounting software for your small business.

Start-Up Loans

 This government-funded initiative provides loans, mentoring, and support for start-ups or very small, early-stage businesses with potentially viable propositions that are unable to attract investment from high-street banks. 

To be eligible for Start-Up Loans, there’s a series of criteria you need to meet, including: 

• You’re based in the UK. 
• You’re over the age of 18.
• You’re starting a new business or have been trading for less than two years. 
• You can afford to repay the loan that you receive. 

The scheme provides free business planning to ensure applicants are in the best possible position to receive funding. 

Every loan application is considered according to the needs of the business, and you can borrow up to £25,000. The final loan size will be determined by your business plan. 

UK Export Finance (UKEF)

UK Export Finance says its mission is to “ensure that no viable UK export fails for lack of finance or insurance”, and as such, it aims to help UK exporters in two main ways. 

The first is via its Direct Lending Facility, which gives loans to overseas buyers of up to £200 million when they purchase capital goods or services from UK exporters. 

The interest rate is competitive, and the loan period can be several years to make it easier to repay. 

The second way UK Export Finance helps is similar. Its Buyer Credit Facility provides a guarantee to banks making loans to overseas buyers, again so they can purchase capital goods or services from a UK business. 

This can be for a loan or a line of credit. 

You might direct an overseas purchaser to the Direct Lending Facility to get orders for your business. 

With both schemes, your business gets the loan cash up front, as if this were a cash contract in exchange for the goods and/or services. 

The borrower then repays the loan. In other words, the money never actually passes through their hands. 

UK Export Finance can also help UK exporters to raise tender and contract bonds and access working capital finance via the following: 

To be eligible for export insurance, your business must be based in the UK and the buyer must be overseas. 

For those who export goods, services, or intangibles, UK Export Finance is definitely worth investigating. 

Is a business grant right for you?

A business grant may be worthwhile if it supports a planned project and your business can meet the eligibility, funding, and reporting requirements. 

Compare the potential award with the time and conditions involved. Start by shortlisting schemes that match your location, sector, and goals. If no suitable grant is available, consider other finance options based on their cost, flexibility, and effect on cash flow.

Frequently asked questions

Editor’s note: This article was first published in July 2017 and has been updated for relevance.