The prospect of climate change, a shift to renewable energy and a move towards plastic and waste-free living has opened up a world of opportunities for environmentally minded entrepreneurs.
With customers willing to pay more for sustainable products and services according to research by YouGov opens in new window and legislation prompting businesses into more environmentally friendly activities opens in new window, the next decade is likely to see a boom in green businesses that deliver sustainable products and services opens in new window.
The green shoots of sustainable businesses are already evident. London’s green economy generates around £28bn Opens in new window in the capital, employing around 160,000 people and growing at around 6% each year.
A 2021 study by Deloitte found that environmental awareness among UK consumers has reached a record high, with 85% of shoppers making at least one lifestyle change to be more sustainable Opens in new window.
Starting a business doesn’t come with a set of instructions.
We know that understanding the many different types of financial product in the marketplace can be difficult.
Our Making business finance work for you guide is designed to help you make an informed choice about accessing the right type of finance for you and your business.
Green grants for green shoots businesses
With the drive towards a carbon-neutral, net zero society gaining urgency due to climbing global temperatures, now may be a good time to launch a business opens in new window geared to helping the planet while meeting customers’ needs.
Sustainable businesses generally operate in an environmentally friendly way opens in new window, producing products and services that look to solve environmental issues and concerns, such as zero waste refill shops or environmentally friendly products.
However, launching a business can require funding either through a loan, such as a Start Up Loan opens in new window, or from investment from other sources.
While many small businesses rely on help from friends and family to get off the starting blocks, green grants and awards are available, subject to conditions, for start-ups with an environmental focus.
Green business grants for sustainable start-ups
As environmental concerns have grown, so too have the number and type of awards, loans, and grants to support sustainable businesses.
Incentives range from direct investment and awards from banks to government and local schemes such as the Rural Business Investment Programme Opens in new window.
We’ve set out below some of the green grants available to start-ups, but remember that that these are examples only and it’s important to investigate loans and grants fully from a wide range of lenders and financial bodies so you can compare options.
It’s important that you seek expert independent guidance to help determine whether any of the options mentioned in this article are suitable for your needs.
In most cases, you’ll need to prove that your start-up will have a positive environmental impact when applying for a grant opens in new window or loan opens in new window and securing finance is not guaranteed.
Local authorities and government
Local authorities may be good place to start, with many offering small grants to micro-enterprises – businesses with fewer than ten employees and a turnover of less than £1.7 million – looking to launch and have a positive impact on the environment.
If you’re planning on launching an innovative green product or service, you can also check if your business is eligible for Research and Development (R&D) tax relief Opens in new window.
The Carbon Trust
SMEs looking to develop innovative environmental solutions can apply for Phase 3 of The Department for Business, Energy & Industrial Strategy (BEIS) Industrial Energy Efficiency Accelerator (IEEA), an £8 million programme that is open to UK businesses to support the commercial demonstration of innovative technologies that have the potential to cut carbon emissions opens in new window through reduced energy consumption opens in new window.
Clean Growth Fund
Created in partnership with BEIS and the CCLA, the Clean Growth Fund is aimed squarely at low carbon start-ups developing solutions that reduce greenhouse gas emissions and improve efficiency in energy, waste opens in new window, transport opens in new window and water use.
Eligible businesses can be at a pre-launch stage or have just started generating revenues, with £40 million of funding available.
Low Carbon Innovation Fund (LCIF)
Developed with the Department of Levelling Up, Housing and Communities and funded by the European Regional Development Fund, the LCIF is investing in businesses in the East of England that aim to make a measurable contribution to reducing greenhouse gases.
The current fund is looking to invest £11 million, including in start-ups that are just launching opens in new window, and the initiative is worth over £100 million in total.
Green Port Hull
Available to small and medium-sized companies located in all areas of Hull and the East Riding of Yorkshire, grants starting at £10,000 are available to, amongst others, launch a new business or upgrade existing businesses with innovative new technologies.
The grant is designed to support the development of businesses in renewable energy, green technologies opens in new window, engineering and low carbon sectors.
Coventry and Warwickshire Green Business Programme
Several grants are available for businesses with fewer than 250 employees based in Coventry and Warwickshire who want to save money on energy, waste and water bills and maximise low carbon opportunities.
The Low Carbon Innovation Grant is designed to support companies developing low-carbon products or technologies.
The grant award is between £1,500 to £50,000 and is designed to cover 40% of improvement costs.
A Low Carbon Revenue Grant aims to support companies looking to commercialise low-carbon products that are new to the market or new to the company with a maximum £6,000 award.
Low Carbon Across the South East (LoCASE) funds small businesses in the South and East of England looking at green projects, with grants ranging from £1,000 to £10,000.
Grants have been awarded to 1,278 small businesses so far.
Business development grants are available for businesses offering low-carbon goods and services, which can be used for costs such as equipment, IT and certification opens in new window.
Green loans for start-ups
While green grants for new businesses tailored to launching sustainable products and services are available, there are also green loans from commercial lenders that are tailored to supporting sustainable start-ups.
Many high street banks offer loans to support investment in sustainable businesses, and we’ve rounded up two examples.
It may be worth investigating a range of lenders who may offer grants and loans for green development.
Please note that loans opens in new window, including those set out below, are subject to status and eligibility and that terms and conditions apply.
There is no guarantee that your business will be approved for finance and loans opens in new window may not be suitable for all businesses.
It is important that you seek expert independent guidance to help determine whether a loan is suitable for your needs.
Barclays Green Loan
Loans are available for small businesses looking to finance sustainable and green energy projects, with up to £5million of investment available for businesses with fewer than 250 employees.
Term length is between one and 20 years and aims to fund green and sustainable projects.
HSBC Green Finance Initiative
HSBC’s Green Term Loans are part of its Green Finance Initiative, with minimum loans from £300,000.
A Green Asset Finance scheme is also available, which helps finance green assets through hire purchase or leasing.
Thinking of starting a business? Check out our free online courses in partnership with The Open University on sustainability in the workplace.
Our free Learn with Start Up Loans courses include:
- Future energy demand and supply
- Organisations, environmental management and innovation
- Introducing environment decision making
Plus free courses on climate and sustainability, teamwork, entrepreneurship, mental health and wellbeing.
Please note that this article and the content provided therein is exclusively for informative purposes. Nothing within this article is intended to provide advice of any kind (including legal, financial, tax or other professional advice). You should get professional or specialist advice before doing anything on the basis of the content contained herein.