For smaller businesses, contracts are always preferable to grants in that they allow a relationship to develop between the customer and the supplier that can be used by the business to gain further custom. More important is that the grant-funding process is deliberately time-consuming and difficult for the applicant, acting as a way of testing their resolve. In this article, we take a look at what is out there in terms of grant funding for smaller businesses, and how to go about securing it.

Research by the Banking Industry Group, a panel on which the FPB sits, indicates that access to finance from commercial sources declined between 2004 and 2007. Since then, there is significant evidence that access to finance has declined still further for smaller businesses and has made this general lack of finance a key issue for the business community.

Viable businesses in certain sectors are looking for additional funding on a short-term basis, of which grants appear to be one of a decreasing number of options.

The FPB would like to see conditions for access to certain funding schemes loosened, particularly those open only to business start-ups, as the indications from Global Enterprise Monitor and other research suggest that far fewer enterprises are likely to start up in the near future than has been the case in the last few years.

Funding sources vary significantly due to a large number of factors. Key amongst these are location, industry sector and the purpose of the funding:

Geographical location: Very few funding sources, such as the Big Lottery Fund, Heritage Fund and the Prince's Trust, are provided nationally; the bulk of funding is undertaken at a regional (through the Regional Development Agencies (RDAs)) or local level (predominantly through Local Authorities). The highest priority localities within a region (often referred to as Tier 3 areas) also have access to special grants, such as the Selective Finance for Investment in England (SFIE) – Scotland and Wales have a similar provision. There is additional support in deprived areas through various regeneration schemes and through the Local Enterprise Growth Initiative (LEGI) schemes.

Industry sector: Some industry sectors are more likely to receive support through grant funding than others. These include specialist areas of the food industry and new technologies. Also business types that are under-represented, such as those owned by ethnic minorities or women, or businesses that involve traditional crafts, such as stone masonry or harvesting reeds from the Norfolk broads. Being one of your local RDA's key clusters (industries such as biotechnology, motor sports or metallurgy, where the RDA is looking to focus some of its support) can also help in getting funding support from some sources.

Purpose of funding: Funding options vary according to the purpose of the funding. Upgrading assets can make smaller businesses accessible for grants from organisations involved in promoting energy efficiency, such as the Carbon Trust and the Energy Savings Trust. If the upgrade is required for the purpose of a new business or a new process, there are innovation schemes run by each Regional Development Agency in England and there is a plethora of research and development (R&D) grants available. There are also grants available through UK Trade & Investment (UKTI), for those who are looking to export for the first time, and Learning and Skills Councils, for the recruitment or training of vulnerable groups, such as the long-term unemployed and/or young people not in education, employment or training (NEET).

Accessing grants: The most comprehensive source for grants in the UK is through Business Link's website. The site has access to 2,474 grants but, even though this is the best site for finding grants, it is not comprehensive, with a search for Small Business Rate Relief showing just 11 examples.

The site is easy to use, with a three-step selection process to ascertain:

• the type of support required (the options are: Setting up your business, Conservation, Making the most of the Internet, Taking on staff and developing people; Energy efficiency and the environment; Finding new customers and markets; Developing new product or service ideas; Taking new products or services to market; Exporting or finding overseas partners; Investing in plant, machinery or property; Investing in community development; Setting up or running a rural business; Performance improvement and best practice; Learning from other businesses; Specific support for women in business; Easing administration; Business growth and expansion; Consultancy and business advice; Marketing; Exchanging ideas and sharing expertise).
  
  
• the location of the business (part or all of the postcode).
  
  
• the industry of business, from the following options:
  
  
  
  • Agriculture and fishing
  • Energy and water
  • Manufacturing and engineering
  • Transport, warehousing and distribution
  • Construction and property services
  • Biotechnology, medical and chemical
  • Other sectors
  • Creative services and media
  • Professional and other business services
  • Consumer products
  • Personal services
  • Retail and wholesale
  • Recreation, culture and tourism
  • Hotels and restaurants
  • Information technology and telecoms.

In addition, the site brings up other alternative methods of finance (under Awards and Loans) and the option of specific consultancy, which could signpost you to other sources of finance.

Whilst using the search tool to identify available funding is not time-consuming in itself, the different requirements for each scheme mean that it is not always clear at the outset whether a company is eligible. Looking up the specifics of each scheme is a useful time-saving precaution in the long-run. The search can also be augmented by contacting the Local Authority or Chamber of Commerce as well as the consultancies listed. The requirements on the application forms for funding are not always clear, so it is always worth contacting the funding body directly or enlisting professional advice to help with the completion of the form.