Getting your business up and running as an SME is far from the easiest thing to do, with the many development stages involved as a start-up requiring a considerable amount of money and investment. Luckily in the UK, there are a number of government initiatives available for new companies that it is possible for you to take advantage of. Here at Guarantor Loans, we take a closer look at these types of grants and funding available.
These government-funded start-up loans (alongside providing mentoring and support) are aimed at start-ups and also early stage businesses who have good propositions but have thus far struggled to gain investment from high-street lenders. The initiative also provides free business planning to borrowers, to ensure that your company has the best possible chance of being successful.
In order to be eligible for this scheme, your company must either not have launched yet, or it has been trading as a business for less than a year. The exact amount you will receive will be dependent on the needs of your company and the business plan you have provided. On average, start-up loans provided to help kickstart your business journey through this scheme are around £6,000. It should also be noted that existing businesses that are purchased and go under new management are unlikely to qualify for these types of schemes (source: Advice to Buy).
Regional Growth Fund (RGF)
If your company is looking for finance equating to less than £1 million in total, it is worth looking at applying for funding through the Regional Growth Fund programmes. Since 2011, a staggering £1.7 billion has been provided in this government scheme helping over 9,400 small and medium-sized businesses. This programme is run by either local or national organisations who have been awarded funding to then provide to companies who are eligible.
If you are interested in the Regional Growth Fund programme you will need to meet the following criteria:
- The company must be based in England
- You will need to provide a growth plan
- The company needs to either create or protect jobs
- The business will need to be investing in private capital
- Be unable to find funding elsewhere when making the application
- Be state aid compliant
- Want to strengthen your business
It is important to note that this is not an exhaustive list, with each Regional Growth Fund programme having a specific set of criteria when it comes to the application process. It is recommended to check this before you apply. To see the list of ‘live’ programmes currently available across England, click here.
Business Finance Partnerships
This is a government invested scheme (equating to over £1.2 billion) and it is intended to diversify the sources available to SMEs through non-bank lenders. This finance is matched with an equal amount provided by private sector investment and is invested in commercial terms. So far, the Business Finance Partnership scheme has been extremely successful, creating around £5 of lending for every £1 of taxpayers money.
Overall, a total of £172 million of government funding has been used by the lenders, with an extra £705 million provided by private sectors investors. In terms of the loans given, this will be dependent on your specific set of business circumstances. When making an application it is possible for SMEs to apply directly for finance with non-traditional lenders as well as fund managers.
Enterprise Investment Scheme (EIS)
This scheme is designed in order to help the company raise additional funding in order to be able to finance growth in your business. The programme does this by providing tax relief to individual investors who buy shares in your business. With EIS it is possible to raise up to £5 million annual, with a cap of £12 million over the course of your company’s lifetime. There is certain eligibility criteria you will need to meet to get onto this programme, such as:
- Not in control of another company (other than qualifying subsidiaries)
- Established in the UK
- Do not have gross assets in your business that are worth more than £15 million before shares have been given
- Not trading on the recognised stock exchange
UK Export Finance (UKEF)
Another form of government funding for new businesses is UK Export Finance. This type of funding helps UK based exporters by ‘underwriting’ bank loans that are then offered to overseas buyers of UK services and products. As a result, this means that it takes on the potential risk of the loan fro the bank, meaning that the bank is more likely to then give it.
This kind of finance can help UK exporters when it comes to raising contract and tender bonds, as well as the ability to access working capital finance. In order to be eligible for this scheme, your company must be UK based and have a buyer that is based overseas.
Business Angel Co-Investment Fund
This is a £50 million fund (with finance coming from the Regional Growth Fund) which invests directly with syndicates of business angels who are based in England who would like to invest in SMEs in qualifying areas of the UK. To clarify, business angels are entrepreneurs who provide capital to SMEs and startups. This is usually in return for a percentage in the company.
If you are interested in finding out more about this type of government-funding, you should get in contact with a business angel syndicate or network. The full list of business angels available in the UK are on the UK Business Angels Association Website.
Enterprise Capital Funds programme
This government-funded scheme is specifically aimed at early stage innovative SMEs who have high growth potential, providing venture capital investment in both the public and the private sector. Equity finance can be difficult to obtain if you are an innovative business, partly because investors tend to prefer later-stage companies as the costs of undertaking due diligence tends to be significantly lower. So far, this scheme has invested more than £160 million in UK companies since 2006.