Accessing finance can be one of the biggest hurdles for small businesses looking to grow, manage cash flow or get off the ground.
Government-backed funding could be an ideal solution, especially if you’ve struggled to get the finance you need elsewhere.
Whether you are a start-up or an established business, understanding what is available and how to access it can be the key to unlocking new opportunities.
What government funding is available?
Several funding schemes are available if you are looking for ways to finance your business through government support.
These options are designed to improve access to finance by offering more flexible terms, lower interest rates or government-backed guarantees. Below are the most common government loans for small businesses in the UK.
Start Up Loans
The Start Up Loans scheme is aimed at new businesses and entrepreneurs who have been trading for less than three years.
It offers unsecured personal loans of up to £25,000 with a fixed interest rate and a repayment term of one to five years.
As part of the loan, you also get free support with writing a business plan and 12 months of post-loan mentoring. These loans are a good option if your business doesn’t have the trading history to qualify for traditional business finance.
Growth Guarantee Scheme
The Growth Guarantee Scheme is a government-backed finance initiative for UK businesses. It replaced the Recovery Loan Scheme in 2024.
It is designed to help small UK businesses access the funding they need to grow, invest or manage cash flow. The scheme provides lenders with a 70% government guarantee, making it easier for businesses to secure finance even if they have limited security or trading history.
Under the scheme, loans, asset finance, invoice finance, and overdrafts are available, with borrowing amounts and terms depending on the lender.
British Business Bank
The British Business Bank does not lend directly to small businesses but works with a wide network of approved lenders to make finance more accessible.
The aim is to increase the availability of affordable loans for small businesses through its various programmes, including ENABLE Guarantees and the Bank Referral Scheme.
If your business has struggled to get finance through traditional routes, this type of government-backed support could be an alternative way to get funding.
Local enterprise partnership loan schemes
Some regional growth hubs and Local Enterprise Partnerships (LEPs) offer business loan schemes in partnership with central government.
These are typically aimed at stimulating economic growth in specific areas and may come with favourable terms or added business support.
Eligibility criteria and loan amounts vary by region, so it is worth checking what is available in your local area.
How to apply for government funding
Once you have identified the type of government funding that suits your business, the next step is understanding how to apply.
While each scheme may have its own requirements, there are a few steps and criteria that apply across most government-backed finance options.
What are the eligibility requirements?
To qualify for a government-backed business loan, your business will need to meet the eligibility criteria. These can vary by scheme and lender, but typically include:
- Being a UK-based business
- Trading as a sole trader, partnership or limited company
- Meeting the scheme’s size criteria (e.g. having a turnover of less than £45 million for GGS)
- Having a viable business proposition
- Not being in financial difficulty or subject to insolvency proceedings
Some schemes, such as the Start Up Loans programme, are only available to businesses that have been trading for less than three years.
Others, like the Growth Guarantee Scheme, are open to a wider range of small and medium-sized businesses. Always check the specific requirements of the scheme you are applying to.
Where do you apply for government funding?
Most government-backed funding is offered through accredited lenders rather than directly from the government. This includes high-street banks, online lenders and alternative finance providers.
You can apply directly through these lenders or work with a commercial finance broker like Aurora Capital to find the right option.
You can register for a Start Up Loan here. The Growth Guarantee Scheme is available through any of the British Business Bank’s accredited lenders.
Is a government-backed loan right for your business?
Government-backed loans can be a practical and affordable way for small businesses to access finance, but they are not right for everyone.
Before applying, consider your specific financial situation and what you want the funding for.
What should you consider before applying?
Start by reviewing your business’s current position and goals. Ask yourself:
- Do I meet the eligibility criteria? Some schemes are only available to certain types of businesses, such as start-ups or those with limited turnover.
- Can I afford the repayments? Even with lower interest rates, loans must be repaid in full, usually on a monthly basis.
- What is the purpose of the finance? Some schemes ask you to state how you plan to use the funds, such as for working capital, new equipment or expansion.
Government-backed loans are predominantly designed for new or small businesses that are struggling to access the finance they need to grow.
If your business doesn’t fall into this category, it’s worth considering traditional business finance first.
What are the alternatives to government funding?
If a government-backed loan does not meet your needs or you’re not eligible, there are several other types of business finance to consider:
- Unsecured business loans: These loans do not require collateral and are a flexible way to access the funds your business needs.
- Merchant cash advances: This type of finance allows you to borrow based on your card sales and repay what you borrow through a percentage of your future card transactions.
- Invoice finance: This is way to unlock cash tied up in unpaid invoices, borrowing a percentage of what you are owed.
- Asset finance: This allows you to buy new or used assets and spread the cost over time.
Choosing the right business loan option comes down to understanding your business’s goals, funding needs, and financial position.
Can you get a business grant?
Government grants can be an attractive alternative to loans because they typically do not need to be repaid.
These grants are designed to support specific business activities, such as innovation, sustainability or regional growth.
What are government business grants?
A government business grant is a type of financial support you don’t have to repay. They’re awarded to businesses that meet specific criteria and usually come with strict conditions about how the funds must be used.
Grants can cover anything from purchasing equipment and hiring staff to investing in research and development. However, they are highly competitive, with limited funding available and extensive application processes.
Who are business grants for?
Business grants are designed to support specific groups or sectors, such as:
- Start-ups and early-stage businesses
- Businesses located in specific regions or disadvantaged areas
- Firms working in key industries, such as manufacturing or technology
- Companies investing in innovation or sustainability
Eligibility criteria vary from one scheme to another, and many grants require matched funding, which means your business must contribute some of its own funds to the project’s cost.
What business grants are available?
Grant schemes change regularly and are offered by various bodies, including local councils, national government, and industry organisations.
To find a grant that could be applicable to your business, the UK government’s Find a Grant service is a reliable and up-to-date tool for searching for grants and checking your eligibility.
What other government support is available?
Beyond funding, several government-backed resources offer advice, training, and tools to help small businesses grow, plan for the future, or manage challenges.
- British Business Bank – Finance Hub: A comprehensive resource that explains different types of business finance and helps you understand which options might suit your business and growth plans.
- Help to Grow: This resource provides subsidised training for small business leaders, advice on adopting technology, and discounts on approved digital software.
- Local Growth Hubs and LEPs: These hubs offer tailored, region-specific support including free business advice, mentoring, events and information on local funding or development schemes.
- HMRC – Small Business Support: Free webinars, videos and guidance to help you with tax, payroll and VAT. This is especially useful for new or growing employers.
