Part 6 - Grab the Free Money First

There is no such thing as ...

There is no completely free money in the world, unless you trip over a pot of gold in a field. Sometimes grants, government support, prizes, and soft loans are described as “free money” but they all have a significant cost: a substantial amount of time and effort to apply for in proportion to the amount that can be gained, and ongoing requirements for monitoring and reporting which will also take up time and resources.

Having said that, it is my general view that all these things are worth the effort of applying for. Whether or not the money is in fact “free”, the discipline of filling in the application forms and describing your business properly and in some factual detail is an excellent one for any founders. You will learn as much from any rejections as you do from any acceptances.

The sources of this finance vary rapidly, and geographically. It is very hard to provide a complete list of all of them which will stay accurate and relevant for more than two or three months. You could however start looking in these places now, and then ask your peers and other founders for up-to-date information as you go along. (If there is demand, I could try to put up a detailed list that would be relevant on the day that it is posted!)

•         The UK Government               https://www.gov.uk/business-finance-support
•         First Enterprise https://www.first-enterprise.co.uk/
•         Start-Up Loans https://www.startuploans.co.uk/
•         British Business Bank     https://www.british-business-bank.co.uk/finance-options/
•         INNOVATE         https://www.gov.uk/government/organisations/innovate-uk
•         NESTA  https://www.nesta.org.uk/innovation-policy/
•         Your Local Enterprise Partnership growth hub    https://www.lepnetwork.net/

The benefits of these very early sources of money can be quite large if they are used wisely. They may enable you to build a small team, or prototype a minimum viable product, or market test a design, or do some simple test marketing. They are usually small amounts of money and may not give you the ability to do all those things.

Later, there may be other sources of nearly free money, but, again, all have hurdles and criteria that need to be considered. If you have a business with some substance, you might also look at:

•        PAYE rebate      https://www.gov.uk/claim-employment-allowance
•        Apprentices      https://www.gov.uk/apprenticeships-guide/pay-and-conditions
•        R&D tax relief   https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief
•        Creative Industries Tax Reliefs   https://www.gov.uk/guidance/corporation-tax-creative-industry-tax-reliefs
•        Rates relief        https://www.gov.uk/apply-for-business-rate-relief/small-business-rate-relief
•        Broadband vouchers     https://www.gov.uk/business-finance-support/gigabit-broadband-voucher-scheme-gbvs-uk

These amounts may be small, but they are a lot easier to get than equity or formal loans and the getting of them helps investors and lenders understand how well you can explain your proposition. It matters that you can get others to help your business.

Your ability to convince other people to join you in your enterprise is a critical part of the due diligence that any sensible equity investor will undertake. If you have already persuaded one or two people to back you and are still making progress in the direction that you first set out upon, then you have partially prequalified yourself for later investors.

This is very much a double-edged sword, however, because if you go backwards after your first backer comes onboard, then it counts very strongly against you.