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10 top government grants for start-ups: Start-up Finance Feature By Oliver Milman

10 top government grants for start-ups

By Oliver Milman
Tuesday, 21 August 2012

feature-Australian-Dollars-thumbGovernment grants are notoriously hard to snare for start-up businesses and can involve completing a mountain of time-sapping paperwork in the application process.

 

However, it appears the system isn’t always as stringent as it should be. A damning report tabled in the Victorian Parliament last week showed that 50% of all businesses awarded grants had failed to properly meet the criteria.

 

Before you rush off your application in the belief that it’s open season on grants, it’s worth remembering that countless more start-ups are still rejected for grants than are accepted.

 

To help you navigate the complex web of grants, we have partnered with Victoria’s Small Business Festival to hold an instructive, free webinar, no matter where your business is located. You can sign up to the webinar by clicking here.

 

But it’s also worth getting a good handle on what grants are out there for start-ups. The most obvious candidate for new ventures is Commercialisation Australia, which offers matched funding up to $2 million for proof of concept, early-stage commercialisation, skills and management support.

 

But there are others that you may not be quite so familiar with. We’ve picked out 10 of the best, but maybe little-known, grants available to small businesses.

 

For information on each grant, click on the tabs below:

 

 

1. Enterprise Connect

 

Website: http://www.enterpriseconnect.gov.au

 

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An offshoot of the federal Department of Industry, Innovation, Science, Research and Tertiary Education, Enterprise Connect is perhaps best known for the free business review it performs for entrepreneurs.

 

But the network also oversees several start-up focused programs that have cash attached.

 

The Researchers in Business Grant provides 50% of salary costs, to a maximum of $50,000, for university researchers to work on new idea within a business for between two and 12 months.

 

There’s also the Tailored Advisory Service Grant, which stumps up half the cash needed, up to $20,000, to engage a consultant to make improvements in your business.

2. Clean Technology Innovation Program

 

Website: http://www.ausindustry.gov.au/programs/CleanTechnology/CleanTechnologyInnovation

 

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The Federal Government conjured a flurry of clean tech programs this time last year as part of its carbon pricing package.

 

Now that the carbon tax is up and running, it’s well worth looking through the package for a helping hand, if you’re in the green business space.

 

Perhaps most relevant to start-ups is the $200 million Clean Technology Innovation Program, which aims to support the kinds of nascent clean tech projects that Australia has frustratingly lost to other markets – most notably China – in recent years.

 

Grants, on matched funding basis, are available, ranging from $50,000 to $5 million. The eligibility is fairly wide – wind, solar and wave technologies are obvious candidates, but the grant also covers waste management and energy efficiency.

3. TQUAL Grants

 

Website: http://www.ret.gov.au/tourism/business/tq/tgrants

 

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Need a leg-up for a new business idea that will attract tourists and provide employment opportunities for locals? If so, it’s worth knowing there’s an available grant.

 

TQUAL Grants are designed for both large and small businesses in the tourism industry intent on creating projects to develop tourism, economic development and employment.

 

The programs and projects have to be aimed at “innovative” ideas to improve economic development and employment.

 

There are two different streams in the grants project and they provide two different levels of funding:

  • Strategic Tourism Investment Grants. These provide up to $1 million for larger scale projects.
  • Tourism Quality Projects. These grants provide up to $100,000 for smaller-scale projects for collaborative development projects, focused on private sector investment.

The next application round opens in February.

4. Export Market Development Grant

 

Website: http://www.austrade.gov.au/What-Is-EMDG/default.aspx

 

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The strong Australian dollar has made life tough for many Australian businesses, not least its exporters.

 

Given that most start-ups don’t look beyond their local area for customers anyway, it’s clear that more needs to be done to help Australian businesses access overseas markets.

 

The Export Market Development Grant is currently the best avenue for assistance. It’s aimed at any exporting business, as long as it’s a small enterprise.

 

The rules were changed last year so that 50% of export promotion expenses are reimbursed by the government, although the total expenses threshold also increased, to $20,000.

 

Each eligible application can provide up to seven different grants. The applications are open for the 2011-12 year and close on November 30.

5. Venture Capital Limited Partnerships

 

Website: http://www.ausindustry.gov.au/programs/venture-capital/vclp

 

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The flow of start-up capital may be slow and stuttering in Australia, but overseas investors are increasingly looking Down Under for strong returns.

 

Venture Capital Limited Partnerships, set up by the Federal Government, are designed to speed up the flow of foreign investment in “high-risk start-ups and expanding Australian companies.”

 

The scheme, which sees venture capital funds structured as limited partnerships, are available for fund managers with assets up to $250 million.

 

When funds register as a Venture Capital Limited Partnership, they are able to access flow-through taxation treatment. And eligible foreign investors are exempt from capital gains tax on their shares of any profits made by the funds.

 

The manager of the fund is able to claim their carried interest on capital account rather than revenue.

 

But investments must be held for a minimum of 12 months and they must also be “at risk”. Target projects cannot have more than $250 million in assets, and at least 50% of the employees and assets are to be in Australia.

 

Also, businesses cannot have their primary activity in property or land development, finance, insurance, construction or infrastructure.

6. iLab

Website: http://www.ilabaccelerator.com/

 

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As well as the grants available at federal level, there are also various state-based funds open to fledgling entrepreneurs.

 

The Queensland Government-funded iLab is one of Australia’s leading public schemes for tech start-ups.

 

Founded in 2000, the accelerator has incubated more than 100 start-ups and helped them raise more than $70 million in grant and investment capital to fund their growth and generated nearly 400 technology jobs.

 

Acquired by a University of Queensland subsidiary in 2009, iLab still receives state government funding for its new programs, which include the Germinate Program, which offers grants of up to $20,000 for early-stage technologies, and the Accelerate Program, which includes investment of up to $50,000 for product or technical services, or used as matching funds for other grants.

7. Grow Your Business – Group Programs

 

Website: http://www.business.vic.gov.au/grants-and-assistance/grow-your-business/grow-your-business-group-programs

 

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No matter how good your idea or even how plentiful your resources, a promising business can easily be sunk by poor decision-making and bad management practices.

 

The Victorian Government’s Grow Your Business program is a useful addition to the grant landscape due to its focus on developing the management skills needed to grow young ventures.

 

Eligible groups (a minimum of five to a maximum of 15 business participants) can apply for a grant of 75% of costs for the total group project up to a maximum of $15,000.

 

The scheme consists of a subsidised workshop for the participants, with expert advice on business planning, finance and marketing.

 

Along with the group element, entrepreneurs can also access six to eight hours of one-on-one help from a consultant.

8. Enterprise Melbourne

 

Website: http://www.melbourne.vic.gov.au/enterprisemelbourne

 

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Melbourne businesses aren’t the only CBD dwellers to suffer from the rise of out-of-town mega malls – it’s an Australia-wide phenomenon that many small firms have to grapple with.

 

However, not every inner city start-up gets the kind of support offered to Melbourne ventures. The City of Melbourne offers grants of up to $30,000 to “new and innovative” businesses to upgrade their premises, revamp their websites or purchase specialised equipment.

 

Grants are given to small businesses that can demonstrate a “strong point of difference” in the marketplace and are in target sectors including retail, biotechnology, financial services or the creative industries.

9. Startup House

 

Website: http://www.business.nsw.gov.au/assistance-and-support/grants/business/startuphouse

 

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The NSW Government may have come under fire for slashing its small business events program, but it still offers a very different kind of start-up help from other states in the form of Startup House.

 

Startup House is a 3,344 square metre co-working facility for tech ventures in San Francisco. The NSW Government will pick selected ventures from the state to relocate to the premises, paying 50% of their costs, up to $1,250 each.

 

In April, the state government unveiled the first four start-ups to take part in the program, with high hopes that the participants can crack the US market.

10. Innovator of the Year Award

 

Website: http://www.commerce.wa.gov.au/ScienceInnovation/Innovator/about.htm

 

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In a bid to shake its tag as a mining-only state, Western Australia has come up with a decent awards system to back early-stage businesses.

 

The overall Innovator of the Year Award gets a package worth $100,000, which includes a $50,000 cash prize and financial support of $50,000 to further develop their concept. There are also smaller prizes available in other categories.

 

The WA Government hopes that the awards, open to innovators yet to make any money from their inventions, will spur a new entrepreneurial community based around the Innovation Centre at the Technology Park, Bentley.

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I would think that your article on the top 10 government grants for start-ups did not provide much encouragement for your readers. Let's be honest, getting grants for strart-ups is not easy but it is possible. The grants mentioned seemed to go well beyond the "normal" start-up business (if there is such a thing). For example, Enterprise connect requires turnover of $2m - not a bad start up. EMDG requies more than $20k spent in eligible marketing activities. As for VC Limited Partnerships they fund around 5 businesses a year from over 300+ applications. Unless you are onto a winner VC's tend to keep their distance.

It's worth mentioning that most grants are for matching funding. Most start-ups do not have funding, let alone matching funding.

One obvious exclusion is the R&D Tax Incentive which can reimburse 45% of a start-ups R&D expenses and overheads as a tax free cash payment. That can be a real cash benefit. Consider the scenario where the business owners draw a notional salary for R&D activities and immediately lend the money back to the company. If their marginal tax rate is less than 45% they will receive a refund the difference between their marginal tax rate and 45% back from their R&D claim. Assume their marginal tax rate is 30% then they can receive 15% as a refund from their R&D claim plus have the added benefit of having a tax free loan balance owing.

There are currently over 600 grants representing around $22 billion available to Australian businesses. Some are available to specific industries or activities. The first step to claiming a grant is to identify if you are eligible, or to tailor your claim to meet the requirements. It's a specialised area requiring professional advice. But if the grant consultant works for a success fee you can't lose. We have successfully secured grants for many start-ups which are now established, profitable multinational businesses. Be encouraged.

Also don't under estimate the value of accrual accounting for your GST if you have losses. You could be sitting on valuable untapped resource.
Bruce Patten , August 22, 2012
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Thanks for your comments Bruce. I think we make it quite clear in the article that landing a grant is tough and that the process is very competitive.

Like you say, there is no 'normal' start-up. For many start-ups, the idea of spending $20,000 on marketing itself overseas would be pointless.

But there are plenty of new businesses, especially online ones, that would aim to have the majority of their customers from overseas markets. $20k would be a more than reasonable investment for them.

You're not quite right on Enterprise Connect - the researchers grant that we mention requires a turnover or expenditure of $1m a year. Not peanuts and not for everyone, but many start-ups fit that criteria, especially those in the R&D-heavy space.

We actually held a webinar on this very topic yesterday with Adrian Spencer from GrantReady. A recording will appear in our webinar section later today, check it out - http://www.startupsmart.com.au/webinars/

Ollie Milman , August 23, 2012
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Thanks for the article and Webinar the other day Oliver. You did a great job interviewing - keeping the webinar moving and information relevant to startups. This article provides me with some good points of reference to start with - thanks again.
Andrew | Brisbane , August 25, 2012
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Great Article. This should be compulsory reading for anyone thinking about starting a new technology company.

Anthony
www.alderip.com.au
Anthony Alder , September 12, 2012
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