Cash is always a concern for people running small businesses, and it can be hard to see outside of the box in terms of traditional investment and funding. But, there are several government-backed schemes designed to support SMEs that can help these companies grow and stimulate the UK economy – and you may not realise just how many your business could qualify for. With the current economic situation looking ever bleaker thanks to COVID-19, you may find that your search for funding is more important than ever before – so we’ve put together a few options outside of the traditional investment route.
1. SEIS
The Seed Enterprise Investment Scheme was launched in 2011 and offers tax benefits and relief to investors who specifically invest their money in small and early start-up companies in the United Kingdom. SEIS is one of the most reputable government-backed schemes and is designed to give businesses access to capital and investor knowledge that they would otherwise not have access to. Investors can get tax relief on investments up to £100,000 per year. An eligible company must be based in the UK, have less than 25 employees, not currently be listed on any major stock market and be fully independent.
2. R&D tax credits
R&D tax credits are given directly to small businesses to encourage and reward investment by UK companies, particularly in innovation. When your company spends money on R&D, tax relief is applied to the money you pay – either in the form of a cash repayment or a reduction in the amount of corporation tax your company pays. To qualify, you must be registered as a UK limited business that is subject to corporation tax. You also must actively have R&D projects in place and be spending money on those projects.
3. Innovation grants
Created through Innovation UK, these grants give SMEs money to invest in innovation within their companies to help stimulate the UK economy. Generally, the amount of money a business can receive is dependent on what industry you operate in. Often these schemes are looking to invest in areas that are showing increased growth or innovation – like aerospace, healthcare and medicine, climate initiatives and more.
4. Patent Box
Patent Box is another government scheme designed to offer corporate tax relief to companies. Introduced in 2013, it aims to decrease the amount of tax paid on profits that come from international patents owned by your business. It’s open to all sectors and can even apply to the tax paid before a patent was acquired. However, your business will only qualify if your company is liable to corporation tax and takes profit from patents. The company must exclusively own the patent at the point of application.
5. SBRIs
The Small Business Research Initiative is designed to connect SMEs to public sector organisations and projects, generating business and economic growth. Small companies have an opportunity to enter a competitive market by winning contracts of up to £1m to work on public sector and/or government-led projects. For the SMEs that take part, the aim is to stimulate cash flow, innovation and R&D for participating companies. However, this initiative often runs on a competition basis, so it’s a less stable form of investment, but it can help small businesses expand their customer bases within the public sector.
6. Innovation vouchers
Innovation vouchers are supposed to act as cash flow injections for SMEs. The vouchers can offer £2,500 to help generate innovation and growth within the company. For each pound that the company puts towards innovation, the voucher provider will match it, giving the company up to £5,000 in cash. This is an EU funded initiative, managed by Aston University and Birmingham City University. There are several industries where applications are ineligible, so applications are considered on a case by case basis. It also only operates for businesses in the Greater Birmingham and Solihull area.
7. Start-up loans
Perhaps the most traditional method of fundraising, a start-up loan offers entrepreneurs between £500-£25,000 in a loan with a fixed interest rate of 6%. Offering a generous repayment plan, this government-backed loan is available to individuals who want to start a business. The loan is unsecured so you don’t need to put up collateral or provide guarantors when you apply. The loan doesn’t have any restrictions on where it can be spent, but activities will likely have to be detailed in a business plan or cash flow forecast.
8. Regional growth funds
This programme supports eligible projects raising private sector investment for SMEs to create economic growth and jobs. The fund offers grants and/or loans to local businesses and you’ll have to look from region to region to see what is available for your business. A company can ask for a minimum request of £2m and must be a private organisation and commercial activity, with minimal government involvement.
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