subject: Government Business Grant Turnaround Support [print this page] While there has always seemed to a lot of public support available for starting up in business it has also always seemed to be very difficult to find sources of support for businesses that are in difficulty. This article looks at what sources of publicly funded small business financial help exist, and in particular, at government business grant aid for turnaround situations.
There are various forms of publicly funded support for business including schemes such as the old small firms loan guarantee and the current enterprise finance guarantee scheme intended to help businesses borrow from commercial sources; through 'soft' loans and forms of equity investment usually channelled through enterprise agencies and administered on their behalf by local agencies or smaller venture capital firms; and on to grants which are 'sums of money given to an individual or business for a specific project or purpose'.
Grants, free money or time consuming nightmare?
The first thing to say about grants is that while they do not usually cover all of the costs of a project, they do have the great attraction that so long as you adhere to the grant's conditions you do not either have to repay it the way you would with a loan, or have to part with a share of your business to an equity investor.
They are normally given to assist in business development and so are usually linked to either investment in new premises or plant and equipment; or to a particular activity such as training or new product development.
So do grants hvae any disadvantages?
Many businesses find that applying for grants can be not only a long and time consuming process, but also a bit of a gamble with no guarantee of success.
Simply identifying the schemes that your business may be eligible for can be difficult given the range of grants available and funders involved from local authorities, Regional Development Agencies, central government and European Union funding, to non-government organisations 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 within their own application process.
Each funder will have its own objectives which will drive the criteria they will want you to meet which can include:
- the size of your business, as some will only be available for micro or small or medium-sized businesses (SMEs)
- your industry, as some schemes will exclude specific sectors while others will be narrowly targeted;
- your location, as areas designated for economic regeneration usually have more generous schemes than those which are not; as well as
- your planned use of the funds.
Grants are usually thought of as enabling funding designed to allow a project to go ahead which would not do so if the grant was not available. As a result, very few grants are retrospective (as you have obviously managed to do whatever it is without having the grant in place) so you will need to apply in advance for a grant for your project which can obviously result in a delay in starting if it has to await the outcome of an application.
Again as 'enabling funding' few grants will provide all of the cash required for a project so you will normally have to arrange the balance of the funds required, and you may be asked to prove this is in place.
In some situations, such as training grants, you may be allowed to count the cost of your or your staff's time that is contributed towards the project as part of the matching funding 'in kind'.
The grant may also not cover all parts of your project in which case you will need to arrange funding to pay for these parts yourself.
It is important to also bear in mind that even once a grant has been awarded, it still has to be paid which will often be in arrears once you have submitted proof of your expenditure and often payment. So you 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.
Given the level of information that can be required, a grant application may be a time consuming activity. The approval process can also be prolonged, is sometimes subject to the availability of the pot of funds (as they do run out), and it may also require you to make business commitments, such as numbers of jobs or location of premises, that can restrict your ability to make changes to your business.
Against this, the substantial sums that can be raised by way of grants mean that in any large project the prospects of obtaining a grant should be investigated.
Business turnaround grants
Moreover, it's also worth noting that in addition to support for investment in capital projects, some sources of funding can also provide grants in respect of support for salaries and wages over periods of up to two years where jobs have either been secured or saved, which will include turnaround situations and also some business purchases. As a result of the current recession some substantial grants are being made on this basis, on relatively tight timescales as the government is looking to help support sustainable businesses (and the employment they provide).
To access these sorts of schemes businesses should speak to some of the specialist grant advisors who can search the mass of schemes on offer to identify the types and levels of grant for which you may qualify, and then help in managing the application process so as to raise this type of finance as quickly and efficiently as possible.
Of course the information contained in an article like this can never be a full statement of the legal position as the relevant laws are complex and liable to change. This article can only therefore be a general guide as to the issues involved and you should always seek appropriate professional advice on your own particular circumstances before taking any action.
