Can I use government grants alongside loans for agriculture?

Short answer: Yes — in many cases you can combine government grants with loans, but it depends on the grant terms and the lender’s criteria. This guide explains when combinations are allowed, common restrictions, what lenders will check, practical examples for farm projects, and a step-by-step checklist so you can move forward with confidence.

Important: UK Business Loans is an introducer. We do not lend money or provide regulated financial advice. We help match your agricultural business with lenders and brokers who may be able to fund projects. When you request a quote we pass your details to selected partners so they can assess options and contact you. Complete a short enquiry for a free eligibility check: Get Quote Now.

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Quick answer: the short version for farmers

Grants are commonly used alongside commercial finance, but there are two conditions to check first:

• Grant terms: many grants require match-funding, restrict other public funds or set timing rules (reimbursement vs up-front payments).
• Lender criteria: lenders treat grants differently — some accept them as project funding, others exclude expected grant income from affordability, and almost none accept a grant as security.

In practice, a typical route is to use the grant to reduce the project cost while borrowing the remainder, or to use short-term bridging finance if the grant is paid after expenditure. Want to see which lenders are most likely to work with your project? Request a free eligibility check: Free Eligibility Check.

How government grants for agriculture typically work

Types of grants relevant to agriculture

Grants come in many forms. Common examples include:

• Farming Investment Fund (capital grants for equipment and infrastructure).
• Countryside Stewardship and environmental payments (often tied to compliance and outcomes).
• Sustainable Farming Incentive (SFI) and other productivity/environmental schemes.
• R&D or innovation grants for agri-tech pilots and low-carbon projects.
• Local authority or EU-derived grants for niche projects (renewables, slurry stores, anaerobic digestion).

Typical grant features that affect borrowing

• Capital-specific: Some grants only cover fixed equipment or building works, not working capital.
• Match funding: Grants frequently require you to put up a percentage of the total cost from your own funds or other commercial finance.
• Timing: Grants may be paid up-front, or reimbursed after you submit evidence — lenders worry about reimbursement delays.
• Restrictions: Some grants exclude “double-funding” from other public sources or require you to notify funders of other income streams.
• Reporting & clawback: Grants can carry reporting obligations and potential repayment if terms are breached.

Example: a capital grant covers 40% of a slurry store. You must provide 60% either from cash or a loan, and show invoices and compliance for grant release.

When you can combine grants with loans

There are several common scenarios where combining grant and lending is both feasible and practical.

• Match-funding allowed: If the grant explicitly permits commercial borrowing as part of match funding, you can use a loan to cover the balance.
• Capital versus working capital split: Use the grant for capital items and a loan for working capital, installation costs, or to pre-finance grant-eligible purchases.
• Bridging to reimbursements: If the grant reimburses you after completion, a short-term bridging loan or overdraft can cover initial cashflow until grant payment arrives.
• Staged funding: For large projects, grants may fund specific phases while a loan or development finance covers earlier stages or associated costs.

Practical examples

• Example A — Tractor purchase: Grant: 35% capital grant for new machinery. Loan: asset finance or hire purchase covers the rest. Lender values the machine and assesses repayment ability — grant reduces the amount needed but lender usually won’t take the grant itself as collateral.
• Example B — Anaerobic digestion (AD) project: Grant covers a percentage of eligible equipment. Lenders may provide development finance for the rest but will ask for detailed cashflow, EPCs, and may require additional security or guarantees because of grant timing and project risk.

If your grant allows it, combining funding can reduce the cost to your business while enabling investment that would otherwise be unaffordable.

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When you cannot combine grants with loans or when problems arise

Not all grants can be paired with loans — some grant conditions or practical issues make combinations difficult or risky.

• Exclusion of other public funds: Some grants forbid simultaneous use of other public money for the same costs — check for “no double funding” clauses.
• Clawback risks: If the grant requires full disclosure and you hide additional funding, you may breach terms and face repayment demands.
• Timing mismatch: Grants paid only after project completion can leave you short of cash — lenders may be reluctant to lend if reimbursements are uncertain.
• Lenders excluding grants in affordability: Lenders often ignore anticipated future grant income when assessing your ability to repay, reducing how much they will advance.
• Security issues: Grants are typically not transferable collateral. Lenders usually want property charges, equipment liens or personal guarantees instead.

Tip: never assume a grant reduces lending risk — some lenders see grants as administrative complexity rather than lower risk.

What lenders and brokers will check

When you disclose a grant, expect lenders or brokers to request:

• Grant offer letter and full terms and conditions.
• Project quotations, invoices and a clear use-of-funds schedule.
• Cashflow forecasts showing timing of grant receipts and loan repayments.
• Evidence of match funding if required by the grant.
• Details of existing security (charges on property, assets) and any inter-creditor arrangements.

How lender criteria differ by product

• Asset finance: Lenders focus on the asset value and residuals; grants reducing the purchase price are often straightforward.
• Term loans: Affordability is key; lenders may not count grant receipts as reliable income.
• Development finance/large projects: More rigorous due diligence, staged drawdowns and stronger security are common.
• Bridging finance: Used when grants reimburse later; short-term costlier option but useful to solve timing gaps.

Always disclose pending or awarded grants early so the broker/lender can advise on realistic options. Non-disclosure can delay your application or invalidate the grant.

How UK Business Loans helps

We specialise in connecting agricultural businesses with lenders and brokers experienced in farm finance. Here’s how we can support you:

1. Complete a short enquiry (under 2 minutes) describing the project, grant status and the amount you need.
2. We match you with partners who have experience with farm grants, equipment finance, development or bridging finance.
3. Receive no-obligation responses and tailored quotes from brokers/lenders who will review grant T&Cs and lender treatment.

We are an introducer: we do not lend or provide regulated financial advice. We put your details to selected lenders and brokers who will assess your circumstances and contact you with options. If you’d like help finding funders for agricultural projects, start here: Get Quote Now.

For more reading on farm-specific funding options, see our agriculture finance hub on agriculture business loans: agriculture business loans.

Practical step-by-step checklist for farmers

1. Review the grant T&Cs: Confirm match funding, permitted costs, reporting and clawback terms. Contact the grant administrator if unclear.
2. Gather documentation: Grant offer letter, quotes for works/equipment, business accounts, and cashflow forecasts.
3. Decide on funding split: How much the grant covers versus the loan required. Consider contingency and VAT timing.
4. Choose the right product: Asset finance for machinery, term loan for general funding, bridging for reimbursement timing gaps, or development finance for large projects.
5. Disclose everything: Tell brokers and lenders about the grant (pending or awarded) up front so they can advise correctly.
6. Plan timing: If your grant pays later, arrange bridging or staged draws so suppliers are paid and the project moves on schedule.
7. Proceed with matched lender/broker: Compare quotes and terms, check fees, security and repayment profiles before you commit.

Ready to get matched to lenders who understand agriculture projects and grant funding? Get Started — Free Eligibility Check. We’ll only share your details with selected partners who can help — see our Privacy Policy for full details.

Top FAQs

Will a grant reduce the amount I can borrow?

Often yes — a grant lowers the net project cost so you may need a smaller loan. However lenders may exclude anticipated grants from affordability calculations. Always show the actual funding plan to lenders so they can give a realistic answer.

Can a lender take a grant as security?

Usually not. Grants are contractual payments to you and are generally non-transferable. Lenders prefer tangible security such as land charges, equipment liens or corporate guarantees.

What if a grant is paid after I buy equipment?

You can use bridging finance or short-term borrowing to cover the purchase until reimbursement. Make sure the lender accepts grant timing and that match-funding rules aren’t breached.

Do I need to tell lenders about pending grant applications?

Yes. Disclosing pending grants allows lenders to advise whether they will consider expected payments, or whether they will require alternative arrangements until the award is confirmed.

Is UK Business Loans a lender or regulated by the FCA?

No. UK Business Loans is an introducer — we do not provide lending or regulated financial advice. We connect businesses with lenders and brokers who will assess and offer finance. Completing our enquiry is free and no obligation.

Final summary & next steps

Combining government grants and commercial loans is common and often practical — but it’s conditional. Check grant T&Cs, disclose grant details to lenders early, and plan for timing differences between spending and grant payments. Lenders rarely accept grants as collateral and may adjust affordability calculations.

Want specialist help figuring out the right funding split and which lenders will accept grant-funded projects? Request a free eligibility check and we will match you with brokers and lenders experienced in agricultural finance: Free Eligibility Check.

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Author: UK Business Loans Content Team. Last reviewed: 29 October 2025.

1. How can I combine government grants with agriculture business loans?
Yes — you can often use a grant alongside an agriculture business loan if the grant’s T&Cs permit match-funding and you disclose it to lenders so they can structure lending or bridging finance around the grant.

2. Will a grant reduce the amount I can borrow for a farm project?
Often yes — grants lower the net project cost so you may need a smaller loan, though some lenders exclude anticipated grant income from affordability calculations.

3. Can a lender use my grant award as security for a business loan?
Usually not — grants are typically non-transferable and lenders prefer tangible security such as land charges, equipment liens or personal/corporate guarantees.

4. Which finance types work best for grant-supported agricultural projects?
Asset finance for machinery, term loans for balance funding, development finance for large projects and short-term bridging finance for reimbursement timing gaps are commonly used.

5. What documents will lenders or brokers ask for when a grant is involved?
Expect to provide the grant offer letter and full T&Cs, project quotes/invoices, a use-of-funds schedule, cashflow forecasts and evidence of any match funding and security.

6. Will submitting an enquiry to UK Business Loans count as a loan application or affect my credit score?
No — the quick enquiry is not a loan application and won’t affect your credit score; it’s used only to match you with suitable lenders and brokers who may carry out checks later.

7. Is UK Business Loans a lender or regulated financial adviser?
No — UK Business Loans is an introducer that connects you with FCA-regulated lenders and brokers but does not lend money or provide regulated financial advice.

8. How fast will I hear back after requesting a free eligibility check?
Typically you’ll receive responses from matched lenders or brokers within hours, often the same day, depending on complexity and partner availability.

9. What should I do if my grant pays after I’ve already spent on the project?
Arrange short-term bridging finance or staged draws and ensure any lender you use accepts the grant reimbursement timing to avoid cashflow shortfalls or grant breaches.

10. How do I start finding lenders who accept grant-funded agriculture projects?
Complete the short online enquiry for a free eligibility check and UK Business Loans will match you with lenders and brokers experienced in agriculture business loans and grant-funded projects.