Grants, Startup Loans and Freebies: Financial Help for Your Business

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Starting a business entails going through a tedious process of planning, conceptualizing, and sourcing up funds and other resources.

Funding is one of the essential startup boosters that will not only get your business running, but will also help you with smooth, continuous operations. As you begin a new venture, know how and where to get help from, and make sure you know your options.

Whether you are a startup or are already a business owner, as long as you are a UK resident and over 18 years old, it is important that you find ways to level up your business through the right kind of funding.

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COVID-19 Support

As response to the COVID-19 pandemic, the UK government has made available programs that aim to give assistance to businesses. These new programs include the Bounce Back Loan, Job Retention Scheme, and the Self-Employment Income Support Scheme.

Read on to learn more about grants, loans, and other forms of assistance for business owners and freelancers.

Startup Loan

Startup loans are personal loans backed by the government and are most suitable for those wanting to start a business or are considering business expansion.

During the application process, business owners must prepare a business plan, with help from a mentor, and present this plan to a panel. Owners and business partners are eligible to apply for up to £25,000 individually. The maximum loanable amount per business is £100,000 with an average of £5,000. Those granted loans must be able to pay back within five years. Guarantors or assets are not required during the application since the loan is unsecured.

Applications that are approved will get free mentoring for 12 months, as well as other offers exclusive to the business.

Venture Capital Schemes – Seed Enterprise Investment Scheme and Enterprise Investment Scheme

There are tax relief offers from HMRC in order to help investors who buy and hold new shares, bonds, or assets for a specific time period. There are four different schemes:

  • Seed Enterprie Investment Scheme (SEIS)
  • Enterprise Investment Scheme
  • Social Investment Tax Relief (STR)
  • Venture Capital Trusts (VCT)

The SEIS gives business investors an option to claim tax reliefs of up to £100,000 in a single year. This generous offer helps boost a company’s image, giving it more value for investment. The following are the qualifications for this program:

  • less than two years of trading
  • less than £200,000 in gross assets
  • less than 25 employees
  • no history of a different trade

If you have already invested through an EIS or a VCT, then you are automatically disqualified.

The EIS is a similar program, only it’s meant for larger companies, or companies that need more than £12 million. To learn more about these schemes, check out Gov.uk.

The Prince’s Trust

The Prince’s Trust is for people aged 18 to 30 wanting to set up their own business. Those who are unemployed or are working less than 16 hours per week can apply for £1000 to £5000. However, those who have an undergraduate degree completed six months prior to the application, and those who have a postgraduate degree or professional application are disqualified.

Local Authority Startup Schemes

Some local authorities offer schemes for startup businesses in their locality. The Business Finance and Support Finder on Gov.uk has information on schemes available in different areas.

There are also some blue chip companies that sponsor funding available to different sectors. For more information on what kind of financial support are available for your business, check out Better Business Finance. You may also check events that they facilitate nationwide. These events are specifically for startups or small businesses.

New Enterprise Allowance

The New Enterprise Allowance or NEA is specifically designed to provide assistance to those who have been unemployed for a long time. NEA assists in setting up businesses. If you could present a good business plan, you will be assigned a business mentor and will be given an allowance of up to £1,274 weekly for 26 weeks.

In order to qualify for this program, the government has set the following quidelines:

  • you must be over 18 years old
  • you or your partner must be receiving Jobseeeker’s Allowance or Employment and Support Allowance, or Income Support (for lone parents, the sick, and disabled).

If you are self-employed but receive Universal Credit, then you are also eligible

Crowdfunding

If taking a loan from the government or a bank is not an option for you, then you can do crowdfunding. Crowdfunding works when the public supports a business by pre-ordering products or purchasing company equity or making a contribution to a low-cost loan.

There are platforms that can assist you with crowdfunding, whichever route you choose. If you go for the pre-ordering, Kickstarter is one website you may check out. If you plan to sell a stake in your company, you can try Crowdcube or Seedrs. If you choose to have a loan supported by the “crowd”, then you would want to look at RateSetter.

Traditional Bank Loans

Since it is a bit of a challenge to get an approval from banks these days, invest time in preparing a business plan and make sure it has the x factor that will get them to nod. Include how much money you need and what you need it for. To have even better chances, keep your credit rating in check.

If you already have an account with another bank, do not hesitate to look for good deals out in the market; check other banks as well.

Angel Investment

“Angel” in this case refers to a wealthy investor seeking opportunities that will give higher investment returns than banks and properties could.

Angels usually invest from £10,000 to £1 million. With this investment, they usually expect a 2.5x return. Some will also prefer to have a “say” in business decisions instead of asking for a certain amount of company equity.

Despite being aggressive when on the lookout for profitable business investments, angels are conservative in terms of risks. Angels could spend around three to six months deliberating before deciding to invest. They are also not the type to make any follow-up investment.

Angels oftentimes course their investments through networks, where they can make decisions based on experience. Angels are found anywhere, but examples of angel networks are Angels Den, AngelList, and Angel Investors Network.

Venture Capital Investment

Venture capital refers to funding from the income of limited partnerships or trust called venture capitalist (VC) firms. Examples of VC firms are Founders Fund and ACCEL.

These types of firms tend to give good funding opportunities as most of these firms are owned by some of the wealthiest in the world. On average, VCs release investments of £300,000 to £3 million, but are also said to give out as much as £20 million.

However, with large funding come big expectations. VC firms often ask for large company equities along with 38% to 48% annual returns. Fund seekers must be aware that giving more than 50% of equity to one party puts him or her at risk of losing the company.

Since their investment entails big risk, VC firms also take longer to decide before making any investment. They make sure to examine every aspect before taking the plunge, usually taking up to one year of deliberation (longer than Angel investors).

Borrowing from Friends and Family

Another way to help with one’s startup is borrowing from family and friends. Funding is usually exchanged with company equity, which should be a fair deal.

Similar to applying for funding in other institutions, one must prepare a good business plan. This plan must be pitched and supported with details on how the funds will be used for the business, and must have a corresponding business agreement.

Regional Funds

There are also business development grants from local authorities or sector-specific bodies. These institutions can give out freebies of £250 for startup businesses in the Merseyside or support to farmers and foresters of up to £5,000. More information is available in the government’s website Gov.uk Finance Finder.

Broadband

The government opened to the public the new Gigabit Broadband Voucher Scheme or GBVS which aims to give out vouchers and allow businesses to have access to fast broadband. Said to be backed by £67m in funding, this scheme can provide vouchers up to £3000.

The GBVS has replaced the old Connection Voucher Scheme of the 2013 coalition government, when the funding was pulled back in 2015. For more information on this nationwide scheme, visit gigabitvoucher.culture.gov.uk.

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