financing a business - grants and subsidies
There are a wide range of grants and subsidised loans available to UK businesses. Finance is available to help support business expansion, to provide funding for research and development, to support training initiatives, to help acquire new premises or refurbish existing buildings or to support international expansion.
Whilst the provision of actual cash is usually the most important issue, grant aid help can come in many different forms. For example, certain grant agencies will provide assistance in finding investors, to help in generating new export leads or introducing experts to accelerate the development of new product ideas and strategies.
The availability of grants and subsidies often depends on which sector a business is in, where it is located, how well the application is made and timing (some grants only last for a certain period or until the funding has been allocated). The key factor in winning grants and subsidies is whether the funding results in the creation of jobs, especially in regional or local areas that particularly need them. Accordingly, we have set out below further detail on the main forms of regional grant aid currently available in the UK
Restrictions on Grants
One of the strings attached to a grant is that businesses have to put up some of their own funding in addition to grant they might receive. It's rare for a grant to cover more than 50% of the cost of a particular venture or project . In most cases between 15% and 50% will be offered by the grant provider.
Grant funding will usually relate to a specific project. This could be a relocation, the development of a new product, the investigation of a new export market. With major grants such as Enterprise Grants and Regional Selective Assistance the project must become viable within a certain timeframe. In addition, the project plan will need to be well developed and defined, with identifiable deliverables. It is likely that a well-constructed business plan will be an important part of the proposal.
Assisted Areas - the Key Source of UK Grants
Certain areas in the UK qualify for funding because they satisfy criteria for special assistance drawn up by the European Commission on National Regional aid. The legislation that sets out the criteria is called Article 87 (3). The main form of aid in these areas is Regional Selective Assistance ("RSA") - a discretionary grant aimed at safeguarding and creating employment and increasing regional prosperity. It is designed to cover a percentage of the costs involved when a company embarks on a project over £500,000. There are three "Tiers" which define the nature of grant aid under Article 87(3):
'Tier 1' means that over three years 1994 to 1996 these areas had a GDP (Gross Domestic Product) per capital of below 75% of the EU average. In short, these are the areas with the greatest economic need. Tier 1 areas are eligible for RSA grant for large capital projects, and in additionally smaller companies in the area may receive Enterprise Grant - aimed at covering a percentage of project costs for initiatives costing under £500,000.The areas for 2000 to 2006 are:
West Wales and the Valleys
Tier 2 areas are those that are defined to have areas of acute labour market need. Tier 2 is eligible both Enterprise Grant and for RSA - although for RSA the % of project costs supported will be lower than Tier 1. Additionally, the Highlands and Islands Enterprise area in Scotland was awarded assisted area status under Article 87(3)c in recognition of the problems imposed by its sparse population. The Scottish Executive administers RSA grant for projects over £100,000, and for project under that amount the 'Invest for Growth Scheme'.
'TIER 3': ENTERPRISE
A third tier where assistance is available to businesses employing up to 250 people. The areas extend beyond tiers 1 and 2, and complement existing measures to support and encourage the development of small business, acknowledging the essential role small business plays in regional development. RSA is not available in these areas - but as the name suggests, Enterprise Grant is.The Enterprise Grant Areas cover:
Local authority districts with high unemployment or low
Rural development areas
AREAS/RURAL PRIORITY AREAS
Granted aid by the Rural Development Commission, Rural Development Areas are in those parts of rural England suffering a concentration of economic and social needs, where rural regeneration activities are focused. There are 31 individual RDA's covering 35% of England´s land area and some 7% of the population.
Examples of Organisations offering Grants and Subsidies
Grant aid is not just available as part of UK and European government attempts to invest in economically-poor areas. The following list of organisations also provide grants and subsidies to UK business meeting certain criteria:
The Department of Trade and Industry: e.g. small
firms loan guarantee scheme
The Princes Trust: grants for people aged 14-30 to help them set up in business
Export Marketing Research Scheme run by the British Chambers of Commerce
New Deal - Disabled and Long-term III
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