Small business grants: where to look and how they differ from loans

Small business grants are awards of money given to a business for a specific purpose, and you do not have to pay them back. The government’s business support site defines a grant in those terms. The British Business Bank describes grants as payments from the government or a private organisation for a purpose such as training, expansion or research and development.

That sets a grant apart from every kind of borrowing. It is also why grants are narrower than most owners hope: each is tied to a purpose, a place, a sector or a type of business. There is no general grant for running a small business.

Start with the GOV.UK finance and support finder. It lists more than 100 schemes and lets you filter by type of support, including grants, loans and equity, and by business stage, industry, number of employees and region.

The Business Growth Service at business.gov.uk is the government’s UK-wide business support service, announced in December 2024 and built with local and devolved governments. Each nation also has its own helpline, listed on GOV.UK.

Schemes open and close through the year. Treat any list in an article, this one included, as a pointer, and check the finder for what is open today.

Innovate UK funds innovation: it is the UK’s innovation agency and part of UK Research and Innovation. It awards funding through competitions, and each competition sets its own eligibility.

• For a business, the share of project costs a competition covers depends on that competition, so the business funds the balance.
• Awards are subsidies under the Subsidy Control Act 2022.
• Beyond grants, Innovate UK Business Growth advises innovation-focused small and medium-sized businesses, and Innovate UK Business Connect links businesses with outside experts.

If your project is ordinary growth, such as a second site or more stock, an innovation competition is unlikely to be the right place to look.

Businesses in Northern Ireland start with Invest Northern Ireland, which GOV.UK lists as the nation’s business support helpline.

Public funding in Northern Ireland is not only grants. The Investment Fund for Northern Ireland, run by the British Business Bank, offers loans from £25,000 to £2 million and equity investment up to £5 million. Those are repayable loans and investment, not awards. Our guide to business funding in Northern Ireland covers the public funds and commercial lenders side by side.

A grant is awarded and kept. A loan is lent and repaid with interest. Almost every other difference follows from that one.

Some support with a government name on it is still a loan. A Start Up Loan is a personal loan of £500 to £25,000 at a fixed 7.5% a year, repaid over 1 to 5 years. Our guide to start up business loans explains who can apply.

The Growth Guarantee Scheme is not a grant either. It gives the lender a 70% government-backed guarantee on a facility from an accredited lender. The guarantee is to the lender, and the borrower always remains 100% liable for the debt.

Grants come with conditions on what the money is spent on, who can receive it and how you account for it. The details differ by scheme, but the same themes recur.

• A defined purpose. The award is for the project in your application, not for general running costs.
• Match funding. The British Business Bank notes that some awarding bodies require you to contribute a certain amount of your own money to whatever the grant pays for.
• Eligibility rules. Schemes are commonly limited by location, sector, business size or stage.
• Evidence. Expect to keep records of what you spent and to report on what the project achieved.
• Deadlines. Many schemes run in rounds with closing dates.

Before you accept an award, ask the awarding body what happens if the project changes, is delayed or does not go ahead.

You apply to the body that awards the grant, following that scheme’s own guidance. There is no single application form for grants, and each scheme sets its own questions, evidence and timetable.

1. Read the full eligibility rules and guidance notes, not only the headline description. Fit with the scheme matters more than how polished the application is.
2. Set out the project: what you will do, what it will cost, what it will achieve and when.
3. Gather the evidence the scheme asks for, such as accounts, quotes for the work and a forecast.
4. Check whether the scheme pays towards costs you have already committed to. If the guidance does not say, ask before you spend.
5. Submit before the closing date and keep a copy of everything you send.

If an application is turned down, ask whether feedback is available and whether a later round is planned. A project that misses one scheme can sometimes be reshaped to fit another.

Often, yes. HMRC’s position is that grants are subject to the normal taxation rules, so not having to repay a grant does not make it tax-free.

• Grants that meet revenue expenditure, meaning running costs, are normally trading receipts. In practice most grants that fund running costs count as taxable income.
• Grants that meet capital expenditure, such as buying equipment, are normally not trading receipts. A capital grant instead reduces the expenditure that qualifies for capital allowances.

Capzy does not give tax advice. Ask your accountant how a particular award will be treated before you budget around the full amount.

Plan as if the grant may not arrive, because an application is not an award. Do not commit to spending that only works if the money comes through.

• Search again with different filters. A project that fits no national scheme may fit a regional or sector one.
• Ask your nation’s helpline which local schemes are open.
• If the business is new, look at the Start Up Loans scheme, which is built for businesses trading under five years.
• If the project cannot wait, compare the cost of borrowing against the cost of delay. Our overview of government-backed business loans sets out the schemes that work through lenders.
• If you need a match-funding contribution you do not hold in cash, say so early. Borrowing your share adds repayments to a project the grant only part-funds.

Capzy is a credit broker, not a lender, and gets paid by the lender. We do not arrange grants, and it makes sense to check the finder before you look at borrowing.

If you have looked and need to borrow for part or all of a project, you can check your funding options with a soft search that does not affect your credit score. A full application to a lender may involve a hard search, and all funding is subject to status and lender criteria.