Funding for Unemployed Entrepreneurs

The government anticipates that unemployed entrepreneurs will set up 40,000 new businesses by 2013. To help meet this target, it launched the Connect to Work programme at the end of January 2011. The NEA offers entrepreneurs more than £2,000 worth of funding.

National Programme

The Department for Work and Pensions (DWP) runs the NEA scheme. After initial testing in the Merseyside Jobcentre Plus District, the DWP rolls out the scheme to a further 17 districts. From Autumn 2011, the NEA is a national programme.

Eligibility

In the Merseyside test area, unemployed entrepreneurs must be at least 25 years old. They must also have claimed Jobseeker’s Allowance for a minimum of 26 weeks.

Eligibility for the 17-district roll-out and then the national scheme is slightly different. It extends to those aged at least 18 who have received Jobseeker’s Allowance for 26 weeks.

If the DWP requires any unemployed person to join either other DWP-funded programmes, he or she is no longer eligible for the NEA. The Work Programme and New Deal are government schemes that encourage disabled people and the long-term unemployed to gain work experience and learn new skills.

First Stage

When an eligible person expresses interest in becoming part of the NEA, the DWP’s Jobcentre Plus first refers him or her to a mentoring organisation.

After considering the proposed business idea, the mentoring organisation produces an assessment. This looks at the viability of the idea, the prospects for business growth and the entrepreneur’s likelihood of success.

If an assessment is negative, the mentoring organisation refers the entrepreneur back to Jobcentre Plus. When an assessment is optimistic, the mentoring organisation appoints a suitable mentor to help the entrepreneur develop a business plan.

Grant Eligibility Finder

Tell us what you need funding for and we will match you with the types of UK grant most likely to accept your application.

Try our Grant Eligibility Finder free, here on this site →

Mentors

An unemployed entrepreneur who passes successfully through the first stage has eight weeks to complete a business plan. The plan must follow a standard format for commercial ventures. The mentor gives advice about this.

Mentors must therefore be experienced and competent. The DWP expects the mentoring organisations to use mentors that have appropriate qualifications and skills. It has also laid down strict time frames for the mentors to work to.

They must, for example, produce the initial assessment of a business idea within five working days. They must also give at least six months’ mentoring support once an entrepreneur starts a business.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

Financial Help

Once the business plan is in place, the entrepreneur becomes entitled to NEA funding. This has two parts. The first is a weekly allowance. The total for this is £1,275.

The second part of the funding is in the form of a loan for start-up capital. The total amount available is £1,000.

Other Funding Sources

NEA funding may not be sufficient to start a business. A further role of mentors is to help find additional money if necessary. Unemployed entrepreneurs, however, can also take the initiative to secure financial assistance.

The Prince’s Trust, for example, has an Enterprise Programme and awards start-up business funding to young people aged 18 – 30. A set of assessment criteria determines funding. These include the business idea’s potential for success and the likely risk.

Former armed forces personnel can apply to the Royal British Legion for help. The Legion, working in partnership with other organisations, has grants and loans. The awards are generally £3,000 - £7,500, although it’s possible to obtain a maximum of £30,000. The Legion calls its scheme “Be the Boss”.

The four UK regional governments also have enterprise schemes for entrepreneurs. These offer a mix of grants and business advice.

Enterprise Clubs

Like the NEA, Enterprise Clubs are another new government initiative to help unemployed entrepreneurs. The purpose of the clubs is to encourage successful businessmen and women to provide access to local funding and commercial knowledge. With such help, unemployed entrepreneurs are more likely to succeed with their ventures.

At Enterprise Clubs, unemployed entrepreneurs can also meet like-minded people trying to achieve similar goals. They can give each other mutual support and discuss business proposals.

By using Enterprise Clubs and developing local commercial knowledge and skills, unemployed entrepreneurs can create more realistic business ideas and plans. A good business plan then opens the door to NEA finance. Hence the government regards Enterprise Clubs as complementary to the New Enterprise Allowance.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Grant Eligibility Finder lets you tell us what you need funding for and we will match you with the types of UK grant most likely to accept your application. Try it now →