Finance Banner

Small business loan UK



Starting your own business is always an exciting proposition as it allows you to be your own boss and wrest control over the proceedings as per your plans and ideas along with contributing to the economy of your place by providing jobs to others and sharing a part of your profit with the society. However, for your business to run successfully and grow, support from outside will be handy and necessary at times along with your dedication and perseverance, especially if you have very little in your pocket to start with. In UK, there are grants and loans available from both government and private sources for eligible businesses about which will be discussed in the following paragraphs.

Financial assistance from government:

Small businesses in UK are being promoted and supported financially by the government through its various grant programs. It also provides them access to expert advice and updated information . However, due to the tough competition involved in the field, there are strict criteria in place which are to be satisfied for a business to be eligible for a government grant.

Most of the government grants however dont provide for the full expenses, and you should find money from your pocket for the rest. The amount that is to be contributed by you varies for different grant programs .

Kinds of available grants: In addition to the government, the following bodies also offer grants for supporting small businesses in UK.

  • The EU

  • RDAs (Regional Developmental Agencies) in England, Scottish Enterprise, Welsh Development Agency and Invest Northern Ireland.

  • Local councils, authorities and development agencies

  • Business links, chamber of commerce and county enterprise boards.
  • Eligibility criteria: The eligibility of your business for a grant depends on various factors .

  • Business location: The nature and size of the grants approved are different for each country in the UK. Social factors like poverty and the rate of employment also will have an affect in the approval of grants in a particular locality. In some places, the local authorities themselves provide grants in order to help local businesses .

  • How big is your business: Some of the grant programs require your business to be of a certain size, based on either the turnover or the number of employees. Most of the grants are designed to help businesses with less than 250 employees .

  • Your business sector: the European commission has set some restrictions in some sectors which may limit the financing of businesses in those areas.

  • Purpose of the fund: Grants are generally provided for funding particular purposes like buying machinery, office renovation, expansion of the existing business etc.
  • While assessing the feasibility and the profitability of your business project, your commitment towards the business will also be closely scrutinized before approving the grant.Your eligibility of the grant depends largely on your compliance to the terms and conditions set for the particular grant program .

    The application process: While selecting your loan, it would be advisable to have a conversation with a financial adviser who will be able to help you in determining about the kind of grant which will address your needs the best, for a wide range of choices. Once you have found the right program, you will need the following when you go ahead with your application.

  • A complete project report along with the description of the expected benefits from the business

  • Work plan which includes all the costs incurred

  • Proofs of experience in the particular field (of yourself and other top level managers)

  • Business plan

  • Duly filled application forms
  • You may seek the help of your accountant in preparing a business plan. Be sure to submit your application on time and late submissions are mostly rejected. You should be patient in waiting for the reply as it may take anywhere between a few weeks to a year depending on the type of loan and the providing body. Local applications are likely to be processed quickly when compared to others.

    The rejection of an application can happen due to various reasons. If the research plan is not properly drafted and doesnt give a clear vision about the project, the application may not be approved. The benefits expected if the project is funded should be proved beyond doubt . Along with the success potential of the business, its affect on the society as a whole should be explained. In addition to the above, the capacity of the applicant to contribute his share of money into the business will also be checked before approval.

    Other loans: Although there are many institutions in UK that provide small business loans, the main sources are banks and building societies.

    There are provisions for special loans for Muslim business owners, the terms of which are in line with the Islamic sharia law, according to which the lending and investing of money should be ethical and both receiving and paying interest is prohibited.

    Among other loans include Prime, which is for people above the age of 50 who wish to start their own business. Another lending program named Princes Trust is for young people who intend to do business, and the Industrial Common Ownership finance, which is developed to provide financial help for co-operatives, social enterprises and businesses owned by employees. Those who do business with the intention of improving economy in the disadvantaged communities are provided support in the form of loans by a Community Development Finance Institution (CDFI).