Funding Your UK Startup: Grants and Loans for Visa Holders

Funding your startup business can be difficult, as you need to generate the funding to not only get your business up and running but also to ensure that it can survive the test of time. While some companies will have the money readily available, some require extra assistance that comes in the form of grants and loans. This is especially the case for a lot of startup businesses in the UK due to the government-backed schemes available.

When starting a business in the UK, there are certain visa requirements that you need to follow before you can explore the loan and grant schemes offered by the government. Work visas, indefinite leave to remain or British citizenship can all be applied for, and upon being successful, business owners can then apply for funding.

This guide will aim to help any startup business owner in the UK by offering them advice on how they can get the funding they need to improve their company's success. Continue reading for more information.

What’s the Difference Between a Business Loan and a Grant?

Before we explore the different business grant and loan options for visa holders in the UK, it’s important to establish the difference between the two. The main difference is that a business loan usually needs to be paid back with interest, whereas grants do not. With that being said, there are some providers that will set conditions for how the money is spent by businesses and then offer grants that require part repayment.

High street banks and private lenders are usually the providers of business loans, while the government is the primary source of grants to support startup businesses. These government-issued grants tend to offer a free lump sum of money with no requirement to pay it back, which makes them very competitive to receive.

What Types of Business Grants Are Available?

UK Startup Businesses have the chance to receive hundreds of different grants to help them with investing in new equipment and other necessities. While it’s impossible to look at all the grants startups can get, we can look at some of the most common.

Direct Grants

The most common type of startup business funding is a direct grant. This is a lump sum of money that can be given to businesses in the UK from the government to cover essential costs, such as equipment and staff, as well as staff’s training. It can be integral to getting a business off the ground and give them a stable ground to function optimally.

In-kind Grants

Rather than receiving the funding for the essential resources, in-kind grants provide businesses with the direct equipment and technology they need to function. This ensures that the startup business doesn’t receive the funds and use it to purchase unnecessary resources, as it gives them the specific tools to grow instead.

Voucher Schemes and Discounts

The Government can provide startup businesses with vouchers or discounts that can be used when purchasing services or products. This can help significantly with their growth. Government-backed projects like the Gigabit Broadband Voucher Scheme (GBVS) offers startups an ultra fast connection that they might not be able to afford without.

What is a Start-up Loan?

A start-up loan is a UK government-backed personal loan available to new startup owners to help them grow their business. Successful applicants will receive finance for their business, as well as 12 months of free mentoring and exclusive business offers to improve their chances of success. Owners can apply for up to £25,000 each and this can reach a maximum of £100,000 per business. Here are some key things you need to know about start-up loans:

• Borrow £500 to £25,000 with £9,295 being the average.
• Fixed interest rate of 6% per annum.
• 1 to 5 year loan repayment term.
• Free application support.
• Free support and mentoring.
• Free templates and guides.
• No application fees.

Loans can be spent on several aspects of your business, including equipment and staff training courses. You’ll need to describe your payment intentions for your loan within your business plan and then explain how it will help your business succeed.

Do You Qualify for a Grant or Loan?

The three main factors that are considered when applying for a startup business loan is credit worthiness, personal affordability and business validity. Let’s take a closer look at each of these.

Credit Worthiness

Having a credit check that analyses your past and current financial behaviour is required when applying for UK funding. Poor credit history won’t necessarily make you unqualified to obtain a loan, but it is an essential part of the application process.

Personal Affordability

You will need to pay back your loan after a set period of time. Setting a personal survival budget must be submitted along with your application, as this will outline your personal income and expenses you incur each month. The amount you receive and the time you have to pay it back will depend on this.

Business Validity

Lenders need to be confident that your startup business will generate enough money to help you successfully pay back your loan monthly. Therefore, you’ll likely need to prove that there is a sufficient level of demand for your product or service and that you will achieve all the goals set in your business plan.

Conclusion

Funding your UK startup comes down to preparation and understanding. Differentiate between grants and loans, assess your eligibility and present a compelling business plan to increase your chances of being accepted. Your next step? Begin your application, and transform your startup vision into a UK business reality.