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FIN 562 Lecture Notes - Rural Development, Scottish Government, Conditionality

Course Code
FIN 562
D Imaria

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f i n a n c i n g a b u s i n e s s - g r a n t s a n d s u b s i d i e s
There are a wide range of grants and subsidised loans available to UK businesses. Finance is available
to help support business expansion, to provide funding for research and development, to support
training initiatives, to help acquire new premises or refurbish existing buildings or to support
international expansion.
Whilst the provision of actual cash is usually the most important issue, grant aid help can come in many
different forms. For example, certain grant agencies will provide assistance in finding investors, to
help in generating new export leads or introducing experts to accelerate the development of new
product ideas and strategies.
The availability of grants and subsidies often depends on which sector a business is in, where it is
located, how well the application is made and timing (some grants only last for a certain period or until
the funding has been allocated). The key factor in winning grants and subsidies is whether the
funding results in the creation of jobs, especially in regional or local areas that particularly need them.
Accordingly, we have set out below further detail on the main forms of regional grant aid currently
available in the UK
Restrictions on Grants
Match funding
One of the strings attached to a grant is that businesses have to put up some of their own funding in
addition to grant they might receive. It's rare for a grant to cover more than 50% of the cost of a
particular venture or project . In most cases between 15% and 50% will be offered by the grant
Specific projects
Grant funding will usually relate to a specific project. This could be a relocation, the development of a
new product, the investigation of a new export market. With major grants such as Enterprise Grants
and Regional Selective Assistance the project must become viable within a certain timeframe. In
addition, the project plan will need to be well developed and defined, with identifiable deliverables. It
is likely that a well-constructed business plan will be an important part of the proposal.
Assisted Areas - the Key Source of UK Grants
Certain areas in the UK qualify for funding because they satisfy criteria for special assistance drawn up
by the European Commission on National Regional aid. The legislation that sets out the criteria is called
Article 87 (3). The main form of aid in these areas is Regional Selective Assistance ("RSA") - a
discretionary grant aimed at safeguarding and creating employment and increasing regional prosperity.
It is designed to cover a percentage of the costs involved when a company embarks on a project over
£500,000. There are three "Tiers" which define the nature of grant aid under Article 87(3):
'Tier 1' means that over three years 1994 to 1996 these areas had a GDP (Gross Domestic Product) per
capital of below 75% of the EU average. In short, these are the areas with the greatest economic need.
Tier 1 areas are eligible for RSA grant for large capital projects, and in additionally smaller companies
in the area may receive Enterprise Grant - aimed at covering a percentage of project costs for
initiatives costing under £500,000.The areas for 2000 to 2006 are:
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