Grants vs loans: what’s actually different

A grant doesn’t need to be repaid and carries no interest, which makes it more valuable pound for pound than any loan. Because of this, grants are highly competitive, sector-specific, and often come with strict conditions — most require you to match a portion of the project cost yourself (commonly 30–50%), demonstrate a specific and measurable outcome (jobs created, innovation delivered, carbon saved), and spend the money only on what was approved in the application.

Realistically, grant funding suits a specific project with a clear case for public benefit — research and development, job creation in a targeted area, energy efficiency improvements — far better than it suits general working capital or day-to-day running costs. If you need flexible funding for ongoing cash flow, a loan (see our business loans guide) is usually the more realistic route.

What changed in April 2026

For years, the UK Shared Prosperity Fund (UKSPF) was the standard route into local grant funding — a pot distributed to local authorities, who used it to fund business support, skills programmes, and community projects in their area. UKSPF ran from April 2022 to 31 March 2026.

It’s been replaced by two more targeted programmes rather than a like-for-like successor:

• The Local Growth Fund: a 10-year capital settlement running from 2026/27, but restricted to specific mayoral city regions in the North and Midlands with strong productivity catch-up potential — not available UK-wide the way UKSPF was.
• The Pride in Place Programme: funding directed to around 250 specific neighbourhoods, with a focus on community improvement rather than individual business support, and eligibility criteria set locally rather than nationally.

Overall, the total funding available through this route has fallen, and it’s now concentrated in fewer geographic areas. If your business is in one of the mayoral regions covered by the Local Growth Fund, it’s worth checking with your combined authority directly; outside those areas, this route is largely no longer available.

Innovate UK grants

Innovate UK, part of UK Research and Innovation, remains the most substantial and consistently available source of grant funding for genuinely innovative UK businesses, regardless of sector.

Smart Grants, Innovate UK’s flagship responsive programme, are open to any technology area and any part of the economy, provided the idea is genuinely novel rather than simply an improvement on an existing product. Current rounds typically offer:

• Funding requests of £100,000 to £2 million, with total project costs up to £3 million
• Project durations of 6 to 36 months
• All project work must be carried out in the UK, with results exploited from the UK
• Projects of six months or longer must include at least one grant-claiming SME, either as lead applicant or collaborator

Competition is genuinely stiff — this is a merit-based, competitive process, not a first-come-first-served pot, and most rounds are heavily oversubscribed. A well-prepared, specific application focused on commercialisation and economic impact stands a far better chance than a general innovation pitch.

Beyond Smart Grants, Innovate UK also runs Feasibility Studies (typically up to £25,000, for exploring whether an idea is technically and commercially viable before committing to a larger project) and various sector-specific competitions that open and close throughout the year.

Local and regional funding

Outside the Local Growth Fund areas, local and regional grant funding for small businesses is now considerably patchier than it was a few years ago. Some local enterprise partnerships and combined authorities continue to run their own business grant schemes, particularly for specific priorities like town centre regeneration, high street vacancy, or green retrofits. Still, availability varies enormously depending on where you’re based and changes frequently as individual pots open and close.

Sector-specific grants

Several grant schemes target specific sectors or business activities rather than the wider small business population:

• Boiler Upgrade Scheme: support for heat pumps and other low-carbon heating, extended to run until 2028 and expanded to include air-to-air heat pumps and heat batteries.
• Workplace Charging Scheme: grant support for businesses installing EV charging infrastructure at their premises.
• Apprenticeship grants: employers in England can claim £1,000 for taking on an apprentice aged 16–18, or aged 19–24 with an Education, Health and Care Plan.
• Export support grants: schemes to help businesses develop new or enhanced export activity in overseas markets, typically run in time-limited rounds through UK Export Finance and related bodies.
• Sector-specific creative and cultural funding: including schemes supporting music, screen, and other creative industries, usually delivered by specific arm’s-length bodies rather than a single central fund.

These schemes tend to have narrow eligibility criteria and specific application windows, so they reward businesses that already know they fall into the relevant category, rather than serving as a general-purpose funding search.

Where to search for current schemes

Given how quickly this landscape changes, the most reliable approach is checking primary sources directly rather than relying on general guides (including, eventually, this one) to stay current:

• GOV.UK’s business finance support finder: the official, regularly updated tool listing current grants and loans by region, sector, and business size.
• Innovate UK’s funding finder: for current and upcoming innovation funding competitions.
• Your local combined authority or council: for anything specific to your region.
• Your industry body or trade association: many sectors have their own funding updates and grant alerts specific to that industry.

Improving your chances

Grant applications are genuinely time-consuming, and a scattergun approach — applying to everything you might conceivably qualify for — rarely pays off. A more effective approach:

• Check eligibility properly before applying, rather than assuming a broad description of the scheme means you’ll qualify.
• Be specific about outcomes, since most assessors are looking for measurable impact (jobs, growth, innovation, carbon savings) rather than a general statement of need.
• Budget realistically for match funding, and don’t apply for a scheme you can’t actually afford your contribution to.
• Get help with the application if the scheme is significant — many local growth hubs and business support organisations offer free application support, and it’s worth using.

Common mistakes

Useful resources

• GOV.UK business finance support finder — gov.uk/business-finance-support
• Innovate UK funding finder — apply-for-innovation-funding.service.gov.uk
• Our business loans guide — the wider landscape of business finance
• Our Start Up Loans guide — a government-backed option for younger businesses