Grants for Small / Medium Enterprises - Page 2

In addition to direct grant aid, it is worth considering the other forms of publicly funded support that may be available:

Repayable grant: This is where cash funding is offered for a project with the intention that the sums be repaid out of future revenues. The Welsh Assembly Government has recently introduced a repayable RSA for projects with very high forecast rewards. The grant is not repayable however in the event that the performance targets are not met or the project fails.

Soft loan: This is a loan where the terms and conditions for both eligibility and repayment are more generous than those which would prevail if the loan where made available under normal commercial terms. A good example of this is the Small Firm’s Loan Guarantee Scheme (“SFLG”) offered by the DTI. The SFLG guarantees loans from banks and other financial institutions for small firms that have viable business proposals but who have tried and failed to get a conventional loan because of lack of security.

Loans are available for periods of between two and ten years on sums from £5,000 to £100,000 (£250,000 if your business has been trading for more than two years). SFLG guarantees 75% of the loan. In return for the guarantee, the borrower pays DTI a premium of 2% a year on the outstanding amount of the loan. The commercial aspects of the loan are matters between the borrower and the lender.

To be eligible, you must be a UK company with an annual turnover of no more than £3m (£5m if you are a manufacturer). Many business activities are eligible but there are a number of exclusions. Loans are available for most business purposes although there are some restrictions.

Equity Finance: This involves the introduction of a capital sum into the business where the funder does not expect interest or repayment of the loan itself. Instead the funder takes an equity share of the business in the expectation that the value of their share will increase and can ultimately be sold to provide a satisfactory return on their initial investment.

Unlike a venture capitalist who would work in much the same way, the expectations and providers of public funds are less demanding in terms of the eventual return required from the investment, and this is reflected in the terms and conditions of the equity stake. Both UK Steel Enterprise and Finance Wales offer equity investment schemes to SMEs within Wales.

Free or Subsidised Consultancy: Often it is the lack of a particular skill or skills which a company needs - this is particularly so in the case of start-ups and new companies. Some schemes, in recognition of this fact, offer to provide these skills directly via the utilisation, at free or subsidised rates, of consultancy services. This is achieved by paying, in whole or in part, the fees of accredited or approved consultants who possess the skills the organisation lacks. The WDA offer a number of schemes including a subsidised IT consultancy programme.
Having identified what might be an appropriate form of support for your business, there are a number of important things to remember which could make the difference between success and failure in your grant application.