What is a Government Grant?
A government grant is essentially an incentive package made available by various government bodies and organisations to individuals as well as businesses. Government grants (barring the finance grants) are usually non-repayable.
Depending upon the nature of the grant body and the grant objective, these grants can come in a variety of sizes and formats. As far as small businesses are concerned, such grants range from £1,000 to £500,000. Some of the bigger and more prized grants can go even higher.
Why Are Grants Given to SMEs?
Government grants have been there for a long, long time. The names and forms they have taken may have changed over time – from business subsidies to business support – but the objectives haven’t. If you were to analyse government grants across business sectors and districts, two things become very clear:
- Most government grants have a singular objective – to keep the economy growing. This objective takes many avatars such as employment generation, sectoral development, regional development and so on. Grants that have these objectives are more or less permanent fixtures.
- Other grants aim to follow, aid and complement ongoing policies of the government. Such grants typically reflect the incumbent government’s views in regard with trade, environment, social welfare, technology etc.
To put things in a more sweeping perspective, we can say that government grants have three clear objectives:
- Boost economy through regional and local development
- Generate employment by supporting businesses
- Create an economic environment that encourages innovation, entrepreneurship and ‘home-grown’ research
Why SMEs Should Take Government Grants More Seriously
Even though government grants are incredibly appealing, very few SMEs actually realise the potential of such grants. Here are some features of government grants that SMEs can’t afford to overlook:
Government grants are diverse: Very specific grants are available across all business sectors. This allows SMEs to compete more fairly for similar grants.
Grants are more than just money: As we will discuss in the next part of this post, government grants offer much more than just money.
Winning a grant validates your business idea: A large number of SMEs are stuck in the validation loop that stops them from expanding or trading more confidently. Inadequate funding makes matters even worse. A grant can be a good way to turn the corner in such times and receive external recognition and validation.
Government Grants: Shortcomings & Drawbacks
While the features associated with government grants are certainly attractive, there exist shortcomings and drawbacks you should be aware of:
The competition is fierce: The competition for government grants is fierce to say the least. Since young businesses, start-ups and established businesses all tend to spill over into the space that’s reserved for SMEs, the competition can become entirely off-putting.
It can take months before you see the money: Applying for a government grant isn’t always the smoothest of processes. It can take many months for the assessment process to conclude, making grants irrelevant for businesses that require urgent funding.
Grants can never replace external funding: Given their limitations in size and scope, government grants cannot replace external, third-party funding channels – not in the long run, anyway.