If you are a small business in the UK, funding is essential to compete with local rivals, grow your business, and succeed. When businesses are first taking off, it may be necessary to seek funding opportunities.
Funding gives businesses the added security they need to take risks, grow, and add employees. At Tax Driven Accountant, we recommend that all small businesses we work with apply for small business funding to provide the additional support they need to survive in today’s competitive business environment.
In this guide, we will provide you with more information regarding getting funding support for your small business or startup.
Understanding Small Business Funding Support
When it comes to securing funding for your business, there are many options available. You can get loans, grants and independent funding from third parties and picking the right one for your business depends on a number of factors.
For example, if your business is new and you don’t expect to repay the loan quickly, a grant might be a better option. However, if you already have a plan to cover the cost of any borrowed funds, other financing options could suit your needs better, especially if you only require a quick, short-term cash boost.
What is a Small Business Grant?
Not in a position where you feel as though you will be able to repay any funding until your business is more established, or need a quick cash solution to help you get going? You should consider applying for a grant for your small business to help with finance raising.
Small business grants are government or independent body grants that require no repayment. Giving your business the time and financial security required to find its footing.
Financial Support: Government Grants For Small Businesses
Some examples of the government grants available for small businesses in the UK include:
Research and Development Government Business Grant
If your small business focuses on research and development, there are grants available in the UK for SMEs, but they are exclusively for this research.
You can obtain Research and Development tax relief, enabling science and technology businesses to recover a substantial part of their yearly development expenses. This saves them a considerable amount of money annually and provides valuable funding for their research. However, as a specialised grant, many businesses may not qualify.
Not sure if you’re eligible for the grant? We have provided small business funding help to numerous growing SMEs, and we can help you understand if your business can benefit from this tax relief.
Gigabit Broadband Voucher Scheme
If you are a business located in a rural area, you may be eligible for the Gigabit Broadband Voucher Scheme, which is designed to ensure that businesses have the funding they need in order to access high-speed broadband connections, allowing them to connect with other businesses and clients without disruption, boosting the success of the business.
Gov Apprenticeship Scheme
If you are looking to expand your business and achieve growth, you may consider employing more staff or taking on an apprentice to learn your business and support you with the day-to-day tasks that keep your business running.
The UK government wants more businesses to consider apprenticeships and help the younger generation develop valuable skills, so it provides a range of grants and funding to encourage more businesses to hire apprentices.
Find out more about the eligibility criteria for the UK apprenticeship grant on the Gov.uk website.
If you do decide to employ an apprentice in your small business, you will need to understand payroll. At Tax Driven Accountants, we have helped countless businesses with their payroll, and we are ready to help you, too.
Capital Scheme
The government offers four different types of capital schemes to help businesses raise more money by offering certain tax reliefs to owners. These include:
Enterprise Investment Scheme
The Enterprise Investment Scheme is a UK government initiative aimed at promoting investment in early-stage, high-risk companies by offering substantial tax benefits. The government encourages businesses to take growth-promoting risks, which require investment to succeed.
Anyone who invests in an enterprise can receive up to 30% income tax relief on investments of up to £1,000,000 annually, encouraging more investors to put their faith in new, small enterprises.
The Seed Enterprise Investment Scheme
This scheme is a government initiative aimed at helping early-stage startups raise equity by offering significant tax reliefs to investors. This scheme provides 50% income tax relief, capital gains tax exemption, and loss relief, encouraging investors to invest in new businesses.
You can receive a maximum of £250,000 through the Seed Enterprise Investment Scheme. This amount includes any other de minimis state aid received in the past 3 years, up to and including the date of the investment, and counts towards the limits for future investments under other venture capital schemes.
Venture Capital Trust
A Venture Capital Trust is a government-approved company that invests in small, high-growth businesses. It aims to encourage investment in these companies by providing favourable tax benefits to investors, which can help small businesses access the funding they need to grow and expand.
Those who invest through Venture Capital Trust can enjoy up to 30% income tax relief on investments up to £2000,000 per tax year, serving as a great tax incentive for bigger companies to support small businesses.
If you do work with a Venture Capitalist, we would always suggest working with a professional bookkeeper to ensure you are on track, making full use of the money invested in your business.
Private Funding For Small Businesses
If you are not eligible for a grant, you may consider private funding instead. Private funding is essentially funding that does not come directly from the government.
Some examples of private funding solutions include:
Angel Investors & VCs
If you are a business thinking about further scaling your business in the future, you may want to consider Angel Investors and VCs.
Angel Investors
Angel Investors are typically successful entrepreneurs themselves who want to get involved in the next big thing. They’re great because they bring “smart money”, mentorship and a contact book that’s often worth more than the cash.
VCs (Venture Capitalists)
This funding type is more for the heavy hitters. They’re looking for massive scale and will expect a seat at the table. In both cases, you aren’t paying back a loan; you’re selling a slice of the pie. It’s a trade-off: you lose some control, but you gain a powerhouse partner.
P2P & Crowdfunding
Growing options for smaller businesses, P2P (peer-to-peer) lending and crowdfunding have gained popularity for small businesses that are not eligible for larger investments. These lending schemes often come with better interest rates or no need to repay at all, making them a popular solution for businesses looking to grow
P2P
P2P lending, or peer-to-peer lending, is a method of obtaining a loan through a digital platform where individuals or institutions lend money directly to you. This process is generally faster than getting a loan from a bank; however, interest rates may be higher because lenders assume greater risk.
Crowdfunding
Equity crowdfunding, similar to platforms like GoFundMe and Kickstarter, is an excellent way to convert your customers into investors. You can raise small amounts of money from hundreds of individuals. This approach not only helps you secure funding but also serves as a significant marketing advantage. However, running a successful campaign requires considerable effort.
We would recommend working with an accountant if you plan to raise funds for your business, as they can provide industry advice and ensure you make the right choices for your business. Before applying for crowdfunding, an accountant will help you develop a full business plan and financial forecast.
The Importance of Seeking Financial Advice When Applying for Funding
Applying for funding when you are a newly established business can come with complications, and it can be difficult to know if you are approaching the task the right way, filling out the correct paperwork, or even applying for grant options that you’re eligible for.
This is why we will always recommend seeking financial advice from an experienced accountant, as they are more familiar with the funding routes available to small businesses and can point these businesses towards the right funding solution for them, while also ensuring that your application for the funding you have selected is completed correctly.
Get Help Funding Your Small Business With Tax Driven Accountants
After reading this guide, you should have a better understanding of how to secure funding for your small business.
At Tax Driven Accountants, we understand the value of getting early financing for a new business, as having a solid financial foundation can ensure that businesses have the funding they need to really grow.
Are you a small business looking to secure funding? Get in touch to find out how we can help you today.
