The New Enterprise Allowance has ended. How else can start-ups grow?
“Ideas are like rabbits. You get a couple and learn how to handle them, and pretty soon you have a dozen.” - John Steinbeck
Recent statistics show that there were 665,495 startups founded in 2019/2020. Indeed, of all UK organisations, 99.9% (around 5.5 million businesses) are SMEs employing up to 49 people.
Whilst it’s clear that start-ups and small enterprises are the backbone of the UK economy, it’s also no secret that starting a new business - especially in today’s world - is tough.
The New Enterprise Allowance (NEA) scheme was offered by the Department for Work and Pensions (DWP) as a support programme. Its aim was to get people who were claiming specific unemployment benefits to make the leap into self-employment.
The scheme ended at the beginning of 2022, however there’s still a huge array of funding options available, both for benefit recipients and others. We’ve gone through a few of the popular ones here, and although it’s far from an exhaustive list it does offer a practical starting point.
Start-up loans come in a huge variety of shapes and sizes. The terms under which they’re offered also differ between each scheme. Some are backed by government while others aren’t, so claimants are strongly recommended to seek advice if they’re not sure.
Generally speaking, a business has to have been in operation for only 2 years or less to apply for a start-up loan. In order to get one, applicants will need to have a strong business plan and detailed financial forecast. They will also need to show not only what they expect to spend the money on, but also exactly how they’ll pay it back.
Like anything else, start-up loans have pros and cons. The real beauty of them is they tend to be administered fairly quickly, and they’re (usually) unsecured too so no personal assets are put at risk.
If any of your clients are looking to start a business, point them in the direction of the government’s Apply for a Start Up Loan for your business webpage.
Seed Enterprise Investment Scheme (SEIS)
Unveiled by the UK government back in April 2012, the Seed Enterprise Investment Scheme aims to encourage investors to finance new start-ups. Where previously an investor may have viewed the start-up as too risky, the SEIS scheme offers them tax breaks for backing such projects.
It’s a great way for start-ups to get going, and to boost their appeal to investors within their own industry and beyond.
Again, there's a wealth of information about the SEIS on the Gov.uk website.
Local authority funding schemes
Many local councils also offer schemes to finance start-ups, as well as giving them additional support like mentoring.
For instance, two councils partnered together in Norfolk - South Norfolk and Broadland District Council - allow start-ups to apply for start-up grant online as long as their business is less than 6 months old. They must also not have already had a council start-up grant in the last 5 years.
Anyone looking starting up a new business should be encouraged to contact their local council to see what’s available.
Innovate UK supports the government’s vision for the UK to be a global innovation hub by the year 2035. It offers a huge range of funding options for businesses looking to grow through innovative work, as well as via the commercialisation of new products, services and processes.
Young entrepreneurs between the ages of 18 and 30 may be able to get a grant from the Prince’s Trust. The support is specifically aimed at people who are currently unemployed, or who work no more than 16 hours a week.
See the Prince’s Trust Financial Support page if you have a client in mind who you think would benefit.
The purpose of Research and development grants are again to encourage company innovation via the launch of new products and services.
The funding comes from both British and European sources, with new funding rounds opening throughout the year. The trick is in knowing when funding is available and in what area/sector (which is where grant funding consultancies like Myriad are worth partnering with).
R&D grants don’t have to be paid back which is obviously a big draw for small companies instead of loans. Some of the major downsides of other financing options can also be avoided, such as having to give up business equity.
R&D Tax Credits
“The total number of R&D tax credit claims that were made in 2020 was 85,900 which is a 16% increase from 2019. That took the total amount of R&D tax relief paid out last year to £7.4 billion.” - Myriad Associates.
Once a start-up has established itself, it needs to grow in order to survive - and innovation projects are a huge part of that.
R&D Tax Credits are for innovative projects in science and technology. As much as 33% of eligible R&D costs can be claimed by firms who want to research or develop an advance in their field. It can even be claimed on projects that were unsuccessful.
The scheme is open to all UK companies regardless of size, and awards for even the smallest R&D projects can attract tax rebates of thousands. See more about R&D Tax Credits and how to claim.
It's also possible to claim R&D Grants and R&D Tax Credits together.
This article is brought to you by Myriad Associates
Myriad Associates is a world-class team of leading R&D tax and grant funding specialists. Having spent well over a decade striving to maximise claims, we often work alongside accountants, like yourself, to help get their clients the tax relief and grant funding their R&D work so needs.