Business Grants Mythbusted: Answers to All Your Burning Questions

Demystifying business grants. Expert answers to your FAQs, boosting your grant application success with tips, strategies, and insider knowledge.

Megan Williams
May 22, 2024
Business Grants Mythbusted: Answers to All Your Burning Questions

Getting a business grant can be a game-changer, providing the fuel to launch new ideas, scale your business, and drive innovation. But the world of grants can be complex and overwhelming.

That's why we've created this comprehensive guide to answer all of your burning questions about business grants, with a focus on the Innovate UK Smart Grant.

In helping our clients secure over £120M in funding to date, we've seen firsthand the challenges and pitfalls businesses face.

This guide draws on our expertise to help you:

  • Understand the eligibility requirements
  • Navigate the application process with clarity and confidence
  • Learn how to manage and maximise the benefits of grant funding
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Section 1.

Before You Apply

Can I use a business grant to start a business from scratch?

Yes, there are often grants available to help new businesses get started. While smaller, local grants may exist through councils (which Grantify doesn't currently support), many larger grants, such as the Innovate UK Smart Grant, are designed to support start-ups and newly formed companies.

Is my business too new or small to qualify for a grant?

No. In fact, most of the businesses we’ve helped win grants are startups with 1-20 employees. We've even had winners with just one employee. So, if you have a great idea, don't let the size or age of your business hold you back from applying for a grant.

Can I get a grant if my business is cash-strapped?

Yes, grants can be a lifeline for businesses needing an injection of funds for innovation or growth projects when resources are tight. However, if your business is in significant financial difficulty, this could affect your eligibility. Additionally, many grants require match funding.

Matchfunding example
If applying for a Smart Grant of £500k, you might need to contribute £150k yourself to unlock £350k of grant funding.

Are there industry and country-specific grants I should be aware of?

Absolutely! Examples include:

  • UK: Innovate UK often has sector-focused grant competitions for industries like manufacturing, healthcare, or clean energy. Many EU Innovate UK grants also encourage collaboration with other businesses or research institutions.
  • USA: The Small Business Innovation Research (SBIR) program supports a range of industries, while agencies like the National Institutes of Health (NIH) offer grants for medical research.
  • Mainland Europe: Horizon Europe has diverse funding calls, including grants focusing on climate action, artificial intelligence, or creative industries.

What role does innovation play in securing a business grant?

Innovation can play a significant role in getting a business grant, especially for programmes like Innovate UK. Many of Innovate UK’s grants focus on cutting-edge ideas that disrupt markets and have huge potential for commercial success.

Here's what they look for:

  • Technical challenge: Does your project push boundaries and tackle problems in a truly new way?
  • Commercial upside: Will your innovation satisfy a market need and drive significant growth?
  • Speed to market: How quickly can your idea be developed and put into the hands of customers?

It's not enough to just improve an existing product; your project needs to show that leap in innovation.

With that said, innovation isn’t the be-all and end-all. A great product with a clear and compelling social impact could win funding, too.

What is match funding and why is it important?

Match funding is a common grant requirement where you provide a portion of the project costs yourself, alongside the grant funding. For an Innovate UK Smart Grant, this usually means covering 30% of the costs for an industrial research project.

It's important for a few reasons:

  • Shows commitment: Grant providers want to see your belief in the project, demonstrating it with your investment.
  • Ensures sustainability: This shared financial stake makes the project more likely to succeed in the long run.
  • Increases project scope: Your own investment tops up the grant, creating a larger working budget.

Don't worry, there are smart ways to manage match funding. Grantify specialises in strategies to help you maximise your match funding and explain it effectively to grant assessors, including RDEC tax credits, salary reinvestment, and working with our financial partners.

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Section 2.

The Application Process

When are grants available?

Grant availability varies and depends on the specific funding programme.  Many grants, like the Innovate UK Smart Grant, have several scheduled ‘calls’ or competition rounds per year with opening and closing dates. 

Rounds of funding are closing all the time, so don’t miss out.

Find Out if You Qualify for Grant Funding
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If you do, we can help boost your chances of winning a grant through our unique blend of human expertise and cutting-edge AI.
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In a recent round of government funding, 64% of all winners were produced by the Grantify platform.
Take our free 90-second eligibility quiz

Does the location of my business affect my chance of success?

Certain grants might have regional restrictions or prioritise businesses in specific areas. However, many grants, like the Innovate UK Smart Grant, are open to eligible businesses throughout the UK.

How long does the grant application process take?

The grant application process can vary. If you're lucky enough to be applying just as a funding round opens, the whole process, from starting your application to receiving a decision, typically takes a few months.

How long it takes you to write a stellar application depends on whether you go it alone or get expert help. While tackling a grant application alone can take up to eight weeks, Grantify significantly speeds things up. 

Our AI-assisted, expert-led approach lets applicants focus on creating their applications within 3-5 days.

Including our comprehensive review and support process, the entire journey with Grantify generally takes 2-3 weeks.

Can I apply for multiple grants or just one at a time?

You can generally apply for multiple grants, but there are some restrictions to be aware of. For example, you can only apply for one Innovate UK Smart Grant at a time. However, you're free to apply for other grants simultaneously.

What are the common reasons grant applications fail so I can avoid those pitfalls?

We’ve seen thousands of grant applications and their outcomes. The most common issues can be summed up in two words: poor communication. That means:

  • Not demonstrating 'game-changing' innovation
  • Unclear market need
  • Weak impact and benefits
  • The wrong team
  • Muddled budgeting and questionable value for money

These challenges might seem daunting, but our experienced team and advanced tools can guide you through the process, ensuring your application showcases your idea in the best possible light, maximising your chances of success.

Do we have to accept and use the funds if we win?

No, there's absolutely no obligation to proceed with a project, even if you win a grant. However, if you do accept the grant, you are legally obligated to use the funds for the specific project as outlined in your application.

What happens if we’re unsuccessful? Can we try again?

Yes, absolutely. If you're unsuccessful, don't be discouraged. You'll receive detailed feedback from the assessors outlining areas for improvement. If you’re submitting independently, you can use this valuable feedback constructively to strengthen your proposal and then reapply.

If you go with Grantify, we’ll do that for you and support your resubmission free of charge.

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Section 3.

Using Grant Funds

Do you have to repay grants (especially if your project fails)?

No, business grants are not loans and don't need to be repaid if you follow the terms and conditions. This is one of the biggest advantages of grants.

Can I use grant funds to pay myself or other internal salaries?

Yes, you can often use business grant funds to pay internal salaries, including your own. Most grants want to see a significant portion of the funding used for salaries directly related to the project. This is a key benefit, as it allows you to focus on innovation and development without worrying about immediate payroll concerns.

Are there restrictions on how grant funds can be used?

Yes, there are usually restrictions on how grant funds can be used. For Innovate UK Grants, eligible expenses include staff salaries, materials, subcontractor costs (we recommend below a certain threshold), travel for R&D, and other overheads directly related to the project.

Grants typically can’t be used for typical ‘commercialisation activities’ like marketing, sales, manufacturing/production, non-project-related activities, or to cover pre-existing debts.

Are business grants taxed?

Business grants are not considered taxable income in the traditional sense, as you don't necessarily make a profit from them. However, they can impact your tax in a few ways:

  • Grant-funded expenses: You can often deduct expenses directly funded by the grant, potentially reducing your taxable income.
  • Other taxes: While grants themselves might not lead to direct profit, you may still be liable for related taxes like Employers' National Insurance (NI), pension contributions, and VAT on any salaries or purchases funded by the grant.
  • R&D Tax Credits: If your project qualifies, you can claim R&D Tax Credits alongside grants, potentially reducing your overall tax liability.

What happens to any intellectual property (IP) developed using grant money?

You (or your business) will own the intellectual property (IP) developed using grant money. Grant funders like Innovate UK want to foster innovation and drive commercialisation, and allowing you to own the IP makes that process smoother.

How long does it usually take to receive grant funds after approval?

The timeline for receiving grant funds can vary depending on the specific grant program.  Here's a general breakdown for Innovate UK Smart Grants, but keep in mind that other grants may have different payment schedules:

  • Understanding Payment Structures: Most Innovate UK grants pay quarterly in arrears. This means you'll submit regular progress reports for a specific quarter and then receive payment for the approved expenses incurred during that period. Some grants might offer a portion of the funds upfront, with the remainder paid in instalments or upon project completion.
  • Project Start Date: The project start date is established during the grant agreement process and may impact your payment schedule.
  • Typical Payment Timeline: While the exact timeline can vary, you can generally expect the following with an Innovate UK Smart Grant:
    • First Payment: The first payment typically arrives within a few months of the project start date and covers eligible costs incurred during the first quarter.
    • Subsequent Payments: Payments are usually made quarterly thereafter, based on the progress reports you submit and Innovate UK's approval of your documented costs.

What are the common reporting requirements after receiving a grant?

Business grants that use public money understandably have rigorous reporting requirements to ensure accountability and track project progress.

This includes:

  • Progress reports: Regularly submitted documents outlining project milestones, achievements, any challenges you've faced, and how the project aligns with the original proposal.
  • Financial reports: Detailed breakdowns of grant spending, ensuring it aligns with the agreed budget and falls within eligible expenses.
  • Independent Accountant's Report (IAR): Periodically, an independent accountant must verify your project expenditures to ensure accuracy and compliance.

Can I claim R&D Tax Credits?

Absolutely! You can claim R&D Tax Credits even after receiving a business grant. In fact, combining grants and R&D Tax Credits is a powerful strategy to maximise funding for innovative projects

While grants directly fund specific project costs, R&D Tax Credits provide a tax break based on your overall qualifying research and development expenditure. Combining the two gives you access to a larger funding pool.

You might even be able to use R&D Tax Credits to help cover part (or even all) of your required match funding.

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Important Note: There are technicalities involved when combining grants and R&D Tax Credits, depending on the type of grant and the specific claim.

Grantify's R&D Tax Credit specialists can guide you through the process, ensuring you claim the maximum benefit while staying fully compliant.

Can I employ overseas staff using the grant?

This depends on the specific grant you’re interested in. Innovate UK aims to support innovation and economic growth within the UK. Therefore, they generally expect projects to create jobs and primarily use resources within the UK. For instance, any subcontractors you use must be UK-based for the project's duration.

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Section 4.

How Grantify Can Help

What percentage of grant applications are successful?

Success rates differ wildly between grants depending on their size, competitiveness, and the quality of applications received in a given round. Innovate UK Smart Grant is particularly competitive, with a typical success rate of between 5 to 10%.

What is the success rate for Grantify clients?

In a recent Innovate UK Smart Grant funding round, we secured 72% of all funding (51 out of 71 winners used Grantify). Over the last 3.5 years, we've raised £120M+ across hundreds of winners.

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"By far the best example of a project submission that I have seen in a while under this or any other competition."
Innovate UK Examiner, 2020

How does Grantify improve my chances?

We’ve helped businesses win tens of millions worth of government grants for incredible projects by focusing on two critical areas: expertise and efficiency.

Our unique approach combines the power of our AI-powered platform with the knowledge and experience of our team of grant specialists.

The platform analyses past successful applications, provides expert guidance, and offers model answers to craft a compelling narrative around your innovation.

This, along with the support of our specialists, ensures you effectively demonstrate the project's groundbreaking potential and its ability to address a clear market need – matching funders’ priorities.

Grantify saves you immense time and effort. Our platform breaks down complex requirements into manageable steps, provides tailored guidance, and even writes sections of your application.

Instead of staring at a blank page or sifting through vague instructions, you focus on the core of your project while Grantify’s platform does the rest. This streamlined process translates to a stronger, more polished application, ultimately boosting your chances of success.

Have more questions?
Get all the information you need from one of our grant experts.
Take our free 90-second eligibility quiz

Expert answers to your FAQs, boosting your grant application success with tips, strategies, and insider knowledge.

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