How to … apply for a Rural Economy Grant

The REG scheme launched earlier this month will offer £60m to help farmers and entrepreneurs start and expand rural businesses.

Thorough planning will not only give an application the best chance, it will also help develop a successful business so time spent at the outset is important.

These grants are competitive – only projects which meet the criteria will be successful.

However, the scheme is very wide ranging, with almost limitless possibilities.

It is designed to improve farm competitiveness, agri-food, tourism and forestry businesses. Detailed guidance for each of these key areas outlines what the scheme is looking for.

In five Rural Growth Network areas announced last week, there will also be support for businesses employing fewer than 10 people.

The race is on to put together business plans and submit outline applications by the end of April. If there isn’t enough time to meet the first deadline, there will be a second round later this year.

First, be clear about objectives. Stand back and look at all business assets, whether buildings, equipment, staff, products or the relationship with other businesses.

Try to evaluate independently and assess where opportunities might be. This is a simple process but can seem difficult for those involved on a day-to-day basis, especially when there may be several generations involved.

The biggest influencing factor in the success of any new business is almost always its people. Ask a trusted friend for a different perspective on your business and how it could develop.

While your business may well be looking to turn a profit, your application will only be successful if it demonstrates wider benefits to the rural economy such as attracting visitors or employing local people.

Diversification projects often thrive because they’re tailored to one or more existing businesses, utilising more of what’s already available. Innovative concepts are more likely to succeed under this scheme than tried and tested businesses.

Application process

The grant process has two phases – outline application and full application. In each case, a form takes you through the information needed.

For more information on the Rural Economy Grant.

Outline application

  • Identifies the business
  • Looks at how proposed project fits with key grant aims
  • Needs a short description of planned project
  • Asks questions about supply, demand and need – for example competing similar businesses in area
  • Needs figures on projected costs and grant sought to March 2015
  • Breakdown of profit, loss and balance sheet for previous three years
  • Asks what outputs will be achieved – for example, number of enterprises it will support, jobs created or safeguarded, extra visitor numbers, increased productivity or improved animal health
  • Identifies permissions needed – eg, planning, Environmental Impact Assessments, licences.
  • Eligibility and capability of applicant
  • Fit with theme priorities and eligibility of activity
  • Value for money, including an assessment of need/demand
  • Deliverability – ability to raise required private funding, implement within three years, comply with EU state aid rules.

When making the application, assume the funder knows nothing about the value of your work or how a farm business operates – make wording non-technical where possible and set out your case simply and clearly. Quality and consistency are essential.

There are no special formulas or phrases that prioritise one application over another. However, industry jargon can be a real problem – let someone from outside the business read your application and see if they feel excited or confused by it.

Use industry data to benchmark financial projections and outputs. If invited for full application you’ll need to provide much more information including like-for-like quotations.

Applications can be time consuming, especially for novices. Consider using an adviser experienced in grant schemes to give guidance if not the full application service.

Don’t forget tax and rates – an accountant will help assess tax treatment and rateability of diversified activity which is often different to farm activities.

Check how tax relief available to the farm may be affected by the new project.

Consider the VAT implications of the new venture at an early stage. HM Revenue & Customs will look at to whom the grant has been paid to assess whether the new project is or should be part of the main business for VAT purposes.

If the farm receives the grant, this would support the view that the new project belongs to the farm.

A new business purporting to be a separate entity with turnover below the VAT threshold can charge no VAT on its goods or services.

If awarded a grant you’ll still need to find 60% of funding from private sources. At full application stage you’ll need to demonstrate how this is sourced so it must be addressed early. Loan or other private funding needs to be in place at full application stage.

Some farm competitiveness grants will require 85% to be privately funded. If borrowing, banks will need cash flow projections and most likely a full business plan. Shop around – business loans vary widely on policies and rates.

Consider alternative sources – private investors might include friends or family, or for larger projects with a healthy return on investment, private investors known as business angels could be an option.

  • The REG is part of the Rural Development Programme for England (see regional contact details above).
  • It aims to improve competitiveness in agriculture and forestry, to safeguard and enhance the rural environment and foster competitive, sustainable rural businesses and thriving rural communities
  • The scope is very wide – any project which addresses these aims may be considered
  • REG is a competitive scheme, not entitlement based – the best ideas attract the funding
  • Funding is for up to 40% of project cost, worth from £25,000 up to more than £1m/project
  • Outline applications for first round must be submitted by end of April, with decisions to call full applications expected to be made in May and June with funding beginning from autumn
  • No planning permission needed for outline stage but required before full application.

Projects in five key areas of farm competiveness, agri-food, tourism, forestry, and in rural businesses with fewer than 10 employees are eligible for the grants.

As well as encouraging diversification and new agricultural enterprises, grants will be available to improve animal health and welfare, soil nutrients and water management (including reservoir construction) and to develop new opportunities in tourist accommodation and visitor activities.

Agri food businesses can get funding to help build, modernise or install processing and packing facilities or improve waste handling, for example.

Rural tourism enterprises will need to develop high-quality accommodation and encourage longer visitor stays. Linking tourism with local food and culture is also a prime objective.

Collaboration between businesses will help the chance of an application succeeding in some areas.

All projects must deliver “outputs” – benefits which are clearly identified in the guidance, with applications being assessed for value for money and deliverability.

These are very wide ranging, from job creation to improved business efficiency.

Second-hand equipment can be eligible for funding.

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