If your business is innovative or technical, a development grant is one way to fund your business. This is an approach taken by Niall Ash co-founder of Ashgarth Engineering Ltd - Growth Project, a North East based subcontract precision engineering business which offers a precision machining service to its customers both locally and nationally.
We chat to Niall about how he went about securing a grant for his business.
Ashgarth Engineering Ltd is a limited company with two directors, myself Niall Ash and Paul Westgarth, both of whom are dedicated, motivated engineers and have a vast knowledge of the precision manufacturing industry. The business was started in July 2017 and is based in Consett, County Durham. Our customers span several different industry sectors including Oil & Gas, Sub-contract Engineering, Yellow Goods and Consumer Goods.
Deciding to apply for a development grant
To guarantee we are able ensure a competitive, reliable and high quality service to our clients we have to invest in the latest technology CNC machines. As our business is very capital-intensive, our growth plans are restricted by our ability to fund the acquisition of new machines and equipment. Securing the available grant funding will enable us to make the necessary investments, support our customers, develop new customers and ultimately grow the business.
The European Agricultural Fund for Rural Development was in two parts. Firstly, an Expression of Interest was submitted. This is a simplified version of the final application and it gave an overview of the proposed project, costings and benefits. Following this submission, if the project was deemed to meet the national priorities for funding you are invited to submit a formal application.
The formal application was very detailed. It comprised of a written application form which was backed up by an appendix spreadsheet containing all the financial information such as three-year cash flow forecasts, profit and loss information, and project outputs. Additional documentation to support the application was also required which would change depending on the project type. The timescales from being invited to apply for the grant to final submission took us around 10 weeks. Fortunately, we were supported by an experienced business advisor, James Craft, from TEDCO, and the Rural Development Grant Manager made herself available when necessary to talk through any questions relating to the application.
Very little preparation was done for the actual grant application. However, as our business was only six months old we had recently completed a very detailed five-year business plan which included investment requirements and financial projections. This gave us a solid starting point from which to complete the application and be able to demonstrate the positive impact that the grant funding would have to our business.
Growing the business
Although the new machines are on order, we have not felt the impact of the increased capacity and capability. However, we are now starting to quote for new work that we previously couldn’t. The projected impact that the grant will have on our business over the next three years is an average increase in turnover of over 40%.
One of the biggest challenges that we faced has been securing the necessary funds to make the initial purchase of the new machines. This grant payment is made retrospectively once the project is complete, machines are delivered, sited and commissioned. Therefore the business has to find the full amount including VAT upfront to pay for the machines before the grant payment can be reclaimed. For a new business with limited trading history, this has been far from straightforward. Although initially, we tried various forms of commercial borrowing through asset finance providers we were lucky that our bank, HSBC, has been very supportive. Again, our detailed business plan and the fact that we are ahead of our first-year projections has given them the confidence to support us with this project.
Put plenty of time aside to complete the application - it will take at least three times longer than you first think. Always keep an open mind, as things you think will be straightforward will turn out to be your biggest problems. And stay positive and keep pushing forward - it will be worth it in the end.
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Project Name – Ashgarth Engineering Ltd – Growth Project
Funding Provided by – ‘European Agricultural Fund for Rural Development’