I was recently involved in carrying out due diligence on grant applications being awarded by a regional LEP. For confidentiality reasons I will not go into great detail, but the experience has been interesting and I feel that I am in a position to provide guidance to organisations looking for grant funding.
There are 30 Local Enterprise Partners in the UK, and they provide grants normally through the local authorities. The grants can be for specific capital expenditure or to assist a business with its growth plans. The grants are normally subject to matched funding by the business and the objective of the grant is to generate employment. The range of grants can be wide and often confusing, and many chambers of commerce have appointed ‘business navigators’ to help their members to understand what is available.
I will leave the complexity of finding grants for the reader to investigate, and the purpose of this blog is to provide guidance on how to complete the application. So based on my experience in reviewing grant applications I suggest the following:
- Understand what the purpose of the grant is. Read the application form! This sounds obvious, but if the grant is for capital expenditure, then it must be capital expenditure! At least 20% of the applications I reviewed for capital expenditure were at least in part for the funding of overheads. For example, annual salaries, marketing costs and even the cost of a contract hire car.
- The grant will normally be supporting a project or single business activity. Identify and define clearly what this project is? In the case of a start-up business this may be difficult, as the project is the start-up. But for an established business you are investing in X capital expenditure, then it is important to understand the incremental benefits of the project / activity.
- The jobs created from the grant funding need to clearly relate to the project / activity. If you are building new facilities, then it is the jobs created in that facility. Not staff that would be recruited as part of your normal business activities.
- Matched funding is normally required with these applications. Demonstrate that the funding is available. Provide evidence of any loans that have been agreed for the project. If it is from reserves, prove that cash is available in the business.
- Keep your application simple and understandable. Many applicants seem to believe that the more information you provide the better chance of getting the grant. If the application form asks for a business proposal and states in a maximum of 1,000 words, then 2,000 words is not helping.
- In some cases I found applicants ‘cut and pasting’ from an old business plan and other data into the application form. This resulted in a long confusing and incongruent statement, not helping me as the reviewer and therefore not helping the business to get the grant! It is better to have a shorter but clear and concise statement of the business proposal. Sometimes it is more difficult to be concise.
- Be honest in the application. If your company has a short-hold tenancy which is owned by the Directors’ pension fund then state it on the application form. When an organisation is looking to spend £100K on a building that is on a short lease it is illogical. But less so if the Directors own the building through their pension fund.
- Financial records. If you are applying for grants and other funding ensure that your financial records are up to date. Do not wait for the statutory due dates. The more up to date the better! If you have good management accounts, then include them in your application.
- Financial projections. This was the most difficult area for most applicants. The quality of the financial projections was often insufficient for the purpose of the application. Often VAT was wrongly accounted for in the P&L and cash flow forecasts. If a balance sheet is submitted make sure the cash balance agrees to the cash flow projection? This is the area where getting help can be most beneficial. Use your Accountant or contact us at the Helpful Bean Counter Contact us
- If the cash flow generates a significantly high cash balance, this must be support by high profits! Cash is Profit in the long to medium term. So very high cash balances often implies that costs are not fully understood or recognised!
- The worst characteristic is overly complicated analysis which has not been summarised. The business model can be complicated, especially if it is a financial or commission based product. I had one application that modelled the business over 36 months, but produced no annual summaries.
- Provide percentages for Gross Profit and Overheads. Make sure these are consistent with the developments in the business plan. For example, if the intention is to outsource production.
- Try to identify the incremental benefit of the project. If it is generating employment, ensure that this is reflected in your forecasts.
I am an Accountant and I would be naturally critical of the financial projections. But if you are applying for a grant of say £25K, surely it is important to get the logic in your financial projections to reflect the assumptions in your business plan.
The first stage in assessing the grant application was for the business advisers who carried out the due diligence to present their views to a small committee. During the review that I was involved in we had less than 3 hours to assess 70 applications and we reduced the number of application for the final review to only 22.
So if you want to be successful it is important that you follow the above guidelines and ensure that your application is easily understood and can be explained. Before your application is submitted it is important that it is fully challenged. If you don’t have a business adviser, then get as many people (staff, managers and others) to review the application and answer the following questions:
Describe the Project?
How does in fit into the business plan?
Does the application comply with the requirements of the grant?
Are the financial projections consistent with the business plan?
Have all questions been answered?
Remember quality of answers rather quantity of data submitted
These are my personal observations from carrying out a review of LEP grant applications. I am more than happy to help anyone applying for a grant.