New Enterprise Allowance Information

The "New Enterprise Allowance" (NEA) is a new scheme designed to "help" unemployed people set up in self-employment. It comprises of two main stages, the Initial Stage and Trading Stage (neither are official titles).

New Enterprise Allowance: Initial Stage

The "Initial Stage" consists of a mentor being assigned to you who will help you with your Business Plan. During such time you will remain on Jobseekers Allowance (JSA).

New Enterprise Allowance: Trading Stage

The "Trading Stage" follows when and if the mentor approves your business plan. Likewise, if you are applying for a loan the mentor has to approve it (the Business Plan).

To Progress further (to actually get the New Enterprise Allowance) you have to terminate your Jobseekers Allowance claim. You will then be paid an allowance of £65 per week for the first 13 weeks, £33 per week for the following 13 weeks, and £0 thereafter.

This guide is unofficial and compiled by volunteers to fill the gap left by the lack of information available on the New Enterprise Allowance scheme. information includes experiences of those who have actually participated in the New Enterprise Allowance scheme - results and experiences may vary on location.

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Warnings

The New Enterprise Allowance is far from perfect and has its critics, briefly the problems/issues/concerns are as follows:-

• New Enterprise Allowance has no grants/interest-free loans
• New Enterprise Allowance only offers up to £1000 loan
• New Enterprise Allowance loan is 10% interest
• New Enterprise Allowance drops after 13 weeks to just £33 per week
• New Enterprise Allowance offers no mentoring past the seed stages (pre-start up)
• New Enterprise Allowance is limited to 2 jobseekers per month in many jobcentres
• New Enterprise Allowance affects some benefits and income from the business will impact benefits where the New Enterprise Allowance payments are disregarded
• New Enterprise Allowance loans are only received once you have signed off and can take 8 weeks to receive (leaves just 5 weeks of the higher New Enterprise Allowance rate before it drops to £33)

New Enterprise Allowance: Questions and Answers (Q&As)

The initial questions raised about New Enterprise Allowance (NEA) by organisations are as follows.

Are applications welcomed from any type of organisation or do you have to be a not for profit organisation?

It is the Department’s policy that a NEA grant award cannot be made to a for-profit organisation, unless that organisation has taken legal steps to ring-fence the funding, including the incorporation of an asset lock. Before an offer of funding can be made, Jobcentre Plus must be assured that the grant funding will be channelled through a Community Interest Company (CIC), a Special Purpose Vehicle (SPV), or an equivalent model.

If we were successful in our application, would we be allowed to use our employed mentors to deliver the service and pay them their normal salaried hourly rate of pay, as long as we only included our estimate of their ‘reasonable expenses’ incurred in doing so, (rather than what we actually pay them), in our application for NEA Grant to provide mentoring services?

It is acceptable to utilise existing Business Mentors to deliver the service. However, it is not permissible to use NEA Grant funding to pay the Business Mentors a wage or fee for supporting NEA participants, with the exception of reasonable expenses, which must be paid from the grant at the discretion of the lead body, without reducing the lead body’s offer to participants as set out in the application document.

Applications for Grant funding can include an amount for reasonable expenses in relation to the activities of Business Mentors. Details of the lead body’s expenses policy should be clearly stipulated in the application.

Who approves the business plan before it is referred to the lender, and what criteria is it assessed against?

The LAB makes the decision on the business plan, taking account of the recommendation from the Business Mentor – it is not referred to the Loan Provider. We have not been prescriptive in defining delivery, the LAB is responsible for designing the Business Plan assessment, taking account of the scheme’s aims, i.e. to support businesses which have the potential to succeed and have the potential for growth in the future. Once a participant commences trading and wishes to apply for an NEA loan, the LAB will be responsible for the initial referral to the loan service provider, a referral template will be provided.

Does the customer continue to claim JSA during the initial 6-months of trading (for which they will also be supported by mentors?) At what stage is the weekly allowance available to customers, for how long and how is the amount of allowance issued determined?

The customer does not continue to claim JSA during the first 6 months of trading. An approved business plan will give the customer access to:

• The NEA weekly allowance which is payable for 13 weeks at £65 and then for a further 13 weeks at £33.
• A start-up Loan to help with start up costs up to the value of £1,000 (subject to the loan service provider’s terms and conditions).

Participant’s must close their claim to JSA in order to access this financial support. The NEA weekly allowance is not repayable.

Will IB/ESA 6 months+ clients be eligible for NEA as well as JSA 6 month+ clients?

Only customers aged 18 and over who have been in receipt of Jobseeker’s Allowance for 6 months or more will be eligible for NEA.

Can NEA participants get any help with the travel costs to meet with their mentor?

Customers cannot get help from Jobcentre Plus with travel costs to meet their Business Mentor. The lead body could consider payment for travel costs, but this would have to be accounted for within their overall running costs.