Can I Interest You in Free Money?
A grant is defined as a sum of money given to an individual or business for a specific project or purpose.
Despite the fact that grants may not cover the full costs of the project or purpose, the advantages of this type of funding are that as long as you keep to any conditions attached to the funding, there is no requirement to repay it as you would with a loan, nor will you have to give up any share of your business, as you would with an equity investor.
Grants are generally given to assist with business development and will therefore be linked to a specific area of activity such as training, new product development or investment in plant and equipment.
In practice however, obtaining grants can be a long, time consuming and frustrating process, with no guarantee of success.
Finding out what grants are available for your business can be complex as there are a wide variety of different funders providing grants across the country including local authorities, Regional Development Agencies, central government and European Union funding as well as non-government organizations such as the Prince’s Trust; and quangos such as the National Endowment for Science Technology and the Arts (NESTA) or the Carbon Trust.
Each organization will have its own application procedures and will award grants to projects which are judged to meet the body’s own objectives and this then determines the criteria you have to meet to qualify such as:
* the size of your business, some may only be available for small or medium-sized businesses (SMEs)
* the industry you are in, some may be designed to help a specific industry, or a general grant scheme may exclude businesses in some specific sectors; and
* your location, where for example many European Union grants are only available in specified geographical areas requiring economic regeneration
* as well as the use to which the funds are to be put.
Very few grants are retrospective so you normally have to apply for your proposed project in advance. As a result, you project may suffer delays in getting underway if you have to put it on hold whilst you apply for a grant.
Few grants will provide 100% of the cash required for a project and you will therefore need to both arrange the matching funding to provide the balance, and be able to prove to the grant provider that this is in place. This match funding can be by way of new cash introduced into the business by the owner or a new investor, or come from the company’s own cash reserves, or be money that has been borrowed for the purpose, or in some cases the cost of employees time that goes into the project can be included as part of the matching funding.
There may also be elements of your project which are not covered by the grant so you will have to raise the funds to pay for these as well.
Remember that even once you’ve been awarded a grant you still have to then actually receive it. This payment is usually in arrears following your submission of proof that you have incurred, and in some cases paid for, the costs of the project as the grant is claimed as reimbursement. You therefore will need to look at your project’s cash flows to ensure that you are able to finance the project until the grant cash actually comes through.
It is also true to say that grant application procedures can be time consuming, while the approval process can be prolonged, be subject to availability of the pot of funds (and they do run out), and can involve you making commitments in respect of your business, such as where the grant funding is tied to levels of jobs or location of premises, that can impose restrictions on subsequent changes in your business.
Since however, substantial sums can be raised by way of grants and so the prospect of achieving grant funding of up to and over or more against a project makes it imperative that the prospect of grant funding should be investigated for any major project.
In the current economic climate, it’s also important to know that at the moment substantial grants are being made available, on tight timescales as part of government initiatives to help support sustainable businesses.
Fortunately there are some specialist advisors who can help businesses navigate the mass of schemes on offer and assist in firstly identifying the types and levels of grant for which any particular business may qualify and then help in managing the application process so as to raise this type of finance as quickly and efficiently as possible.…