smallbusiness.co.uk: Helping your business think big

Government grants are notoriously hard to come by - but they do exist and they can benefit your business if you know where to look. Clive Lewis, head of enterprise for the Institute of Chartered Accountants in England and Wales, provides an essential guide to how your business can get a grant in 2011.

People starting in business often ask if there’s a grant available to assist with financing it (download the small business finance app to government grants if you are one of these people) and they sometimes regard grants as 'a bit of bunce'. Sometimes a grant can be the difference between success and failure, but they do not come without strings.

Where do government grants originate from?

As the title suggests, they can arise mainly from the government, but also the European Union. They are usually linked to a business activity or specific industry sector, sometimes to a specific geographic area, usually those in need of economic regeneration such as the Enterprise Zones announced in the 2011 Budget.

But the advent of the European Union rules on State Aid has significantly reduced the governments’ scope for grants. What grants are available are usually only for proposed projects, ie the project cannot yet have started. Usually the grant will be a percentage of the total project cost on the so-called 'matched funding basis'. A further complication is that the grants regimes are different in England to Scotland and Wales.

The main areas of grants are designed to encourage investment in innovation, research and development. In England the Grant for Research and Development is available to small and medium sizes enterprises (basically businesses of less than 250 employees) in a variety of forms:

• Proof of Market provides money (up to £20,000) to test the commercial potential of an innovative idea.
• Micro projects are simple low-cost development projects lasting no longer than 12 months.
• Research projects aim to investigate the technical and commercial feasibility of innovative technology and last six to 18 months. Offering up to £100,000 for business with less than 50 employees.
• Development projects assist pre-production prototypes of significantly advanced technology for between six to 36 months. A grant of up to £250,000 is available for businesses with fewer than 250 employees.
• Exceptional development projects involve technologically advanced developments for a particular technology or industrial sector for projects between 6 and 36 months with grants up to £500,000.

Making your proposal

When you have identified the right grant scheme for your needs, you will have to provide:

• a detailed project description
• an explanation of the potential benefits of the project
• a detailed work plan with full costings
• details of your own relevant experience and that of other key managers
• completed application forms where stipulated
• possibly a business plan.

Some businesses get advice from their accountant, who can also help in drawing up an effective business plan. Application must be submitted before the deadline where relevant - late applications are rarely considered.
Most reviewers will assess your proposal by using the following criteria:

• significance
• approach
• innovation
• their assessment of your expertise
• need for the grant.

Applicants must be prepared to wait for anything from a few weeks to a year for a decision. Local applications are typically processed much more quickly than others.

Applications must demonstrate that the project has the necessary finance in place to cover the non-government contribution. This might require a pitch to potential investors if applicants are not providing all the finance themselves.

Other incentives

The Technology Strategy Board provides Collaborative research and development grants to help develop the knowledge for new products and services, whilst cutting the cost burden associated with bringing research to market.

NESTA (National Endowment for Science, Technology and the Arts) supports projects for innovative products, services or techniques.

R&D Tax Credits provide tax relief for research and development which aims to achieve a scientific or technological advance. The 2011 Budget increased the rate of R&D tax relief to 200 per cent in 2011 and 225 per cent in 2012. The Budget also announced Technology and Innovation Centres in high-value manufacturing.

European R &D Grants come via the EU funded Framework Programme which aims to: strengthen scientific and technological structures within industry and encourage international competitiveness. The project must entail R&D collaboration between a UK organisation and an organisation from another EU member state. The Seventh Framework Programme ruins from 2007 to 2013 and involves co-operation in a variety of thematic priority areas such as health, energy and environment.

Other forms of assistance

Other government assistance comes in a number forms, not necessarily grants. Assistance with developing staff’skills can attract 'Train to gain grants'.

The 2011 Budget announced the creation of Enterprise Zones which will have superfast broadband, lower taxes and lower levels of regulation and planning controls.

The government are also developing a 'Business Coaching for Growth' service which will offer, a variety of support to 6,000 to 10, 000 very high growth businesses. The support will include business development coaching, access to innovation facilities, networking and access to specialist advice. The service is expected to start in late 2011.

So the possibility of grants and other government support exists. It is often difficult to find out the grants available and whether your project qualifies. The place to start is the Businesslink.gov Finance & Grants webpage.

Further reading:

• Getting a technology grant
• Government grants: your questions answered
• 118 business grants available through the small business finance app

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