Recruit and develop staff grants can help fund businesses who need help with creating new jobs, taking on apprentices, business coaching and training and skills development. A capital injection can help businesses carry out recruitment activities sooner or carry out larger staff training and development activities than they would have relying on existing financial resources. More often than not this non-repayable money comes from a Government source, local authority or an enterprise support or skills hub.
What do they pay for?
Businesses may seek grants to cover a range of specific staff recruitment and development purposes, which are briefly outlined below.
- Create New Jobs – Funding to help create new roles and hire new staff or take on new apprentices
- Safeguard Jobs – Funding to protect existing job roles and pay salaries
- Business Coaching – Funding to pay for coaching activities to boost expertise at an executive level
- Performance Improvement – Funding to improve overall processes of employees within a particular business function
- Training and Skills Development – Funding to train staff and boost skill development within a company or develop an apprenticeship programme
- Hiring Interns – Funding to take on interns for a work placement and pay some of their salary
What type of alternative funding is available for staff recruitment and development?
If businesses cannot readily access a grant in their sector or region that fits their needs, then the alternative is to take on a repayable business loan. Staff recruitment and development activities fall under business growth or development finance and are typically accessed from a traditional lender, such as a bank or commercial finance specialist. There are a number of specialist loan products specifically designed for business development activities, such as recruitment and staff training or taking on apprentices.
Another alternative route to financing business growth via recruitment and development is peer-to-peer lending where a number of private lenders provide funding to a business with a proven track record through a P2P platform.
What are the pros and cons of a loan vs a grant?
Grants – What are the Pros and Cons?
Advantages of taking a grant
- Grant funding is non repayable and means there is no pressure on business cash flow moving forward compared with repaying loans and their associated interest.
- Grant funding typically targets specific roles for staff recruitment and training areas or apprenticeships and can allow you to explore and expand new areas of your operation that previously have seen staff training development or an increased staff head count.
- If you are awarded a grant from a government backed scheme or enterprise support body, this is considered a vote of confidence from the awarding body in question and means they have backed your business proposition as one that is highly likely to succeed. Details of your receiving an award is often publicised in local press or trade publications and this can be used as a promotional tool to secure new business.
Disadvantages of taking a grant
- Grants usually only offer a percentage of total funding needed for salary costs, apprenticeship or training fees, in many cases in the UK match funding of 50% is typical.
- Access to grants is highly competitive. As the money is free you will be competing against other businesses and will need to stand out from the rest of the applicants to be awarded funding.
- Grant funding pots are often restricted to specific sectors or regions, so it means if you do not operate within that sector or geographic region then you are not able to access the funding. Some areas and sectors have less funding than others.
- Grants often come with terms and conditions and restrictions, which means you are only allowed to spend the money on training and recruitment areas you specifically applied for. Evidence must be provided to show where the money has gone and sometimes the grant is only released as a reimbursement after recruitment costs, training activities or apprenticeship schemes have been completed.
- It is harder for less established SMEs to access money from grants. More often than not a business needs a track record to prove they will make good use of the money and not see the project fail. Some schemes will only accept businesses with up to 2 years of trading records as evidence.
Loans – What are the Pros and Cons?
Advantages of taking a loan or commercial mortgage
- Loans and commercial mortgages will typically cover your entire building development costs meaning you will not need to seek additional funding from elsewhere.
- Loan funding is flexible and can be used for anything in the business and there are typically no restrictions on what areas you may spend the money on that would otherwise be restricted if you were using a grant.
- Loans are not limited by sector and means that certain businesses traditionally excluded from grant opportunities, such as consumer facing cafés and retail outlets can more easily access this type of finance.
Disadvantages of taking a loan or commercial mortgage
- Whenever you borrow a loan, you must always pay that money back over a period of time with interest and this can put a strain on business cash flow in the future if trading conditions become tough.
- There are some cases where interest rates for less established businesses can be higher due to the greater level of risk and unsecured nature of the loans for those without a proven track record. Businesses with a good relationship with their bank can typically negotiate to get a better interest rate.
- If you are trying to seek a loan when your business is already facing financial difficulties, there is a chance that you may be refused a loan if your business is deemed too high a level of risk. Access to traditional commercial loans can also “dry up” when there are difficult economic conditions taking place across the UK.
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