High demand for the government’s Export Market Development Grant (EMDG) program has left small businesses eligible for much less funding than they budgeted for.
For the founders of one Western Australian business, the grant of $240,000 over three years they applied for became just $69,000 overnight, significantly altering their growth plans.
Kura Perkins is the co-founder of Art Hide, a business producing custom homewares from ethically sourced leather, which she launched with her sister Bree Hay-Hendry in 2009.
Last year, the pair applied for a tier two EMDG grant, budgeting $160,000 per year over three years to expand their marketing activities overseas.
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That would make the business eligible for grant funding of $80,000 per financial year.
However, the business will now been notified it will only be eligible for a maximum of $23,000 per financial year, or a total of $69,000 over three years.
Having made use of the Austrade scheme since 2016, Art Hide already has a presence overseas, particularly in the US.
This was going to be the year the founders ramped things up. A budget of $160,000 per year was “something we could really do something with,” Perkins tells SmartCompany.
The founders had planned to work with a digital marketing consultant to invest in market testing in the US, she says, but they won’t be able do that at the same scale now.
At the same time, Perkins was hoping to get to a trade show in the US this year. Between flights, exhibition fees and the exchange rate, those trips don’t come cheap, she notes.
“It’ll have to be more carefully thought through and those trips really maximised,” Perkins says.
“We’ll have to work smarter.”
How has the EMDG grant changed?
Unlike the Boosting Female Founders scheme, for example, the EMDG is not competitive, meaning every business that applies and is eligible is entitled to receive a payment.
Austrade received a record 5,300 grant applications to the scheme this year, and while an additional $80 million was pumped into it, that didn’t go far enough.
The total pot of money was spread between more applicants, meaning each business will now receive a smaller sum than they anticipated.
In some cases, they’re set to receive up to 77% less than they budgeted for.
Applications are also based on projected spending for export-related activities in the 2021-22 financial year. More than half way through, businesses may well have spent that cash already.
Austrade responds to EMDG concerns
Speaking to SmartCompany, a spokesperson for Austrade says businesses were never notified that they would receive a specific amount of funding. Rather, the agency published “the legislated tier caps which dictate the maximum grant amount”.
The spokesperson also said the EMDG guidelines “clearly stated the grant amounts would be allocated based on eligibility and demand and be set within the limits of program budget”.
The funding for the program is set, the spokesperson stressed, saying the maximum amounts allocated were intended to provide fair distribution of available funds.
This was communicated “as quickly as possible”, they say.
Further, the spokesperson suggests that the maximum grant amount available remain comparable with the average grant size over the past 10 years, at around $40,000.
It is not clear what the average grant amount for this financial year is likely to be.
“The reforms to the scheme have reduced red tape through simplifying the rules and making it easier for exporters to apply,” the spokesperson says.
“The reforms have also provided upfront funding certainty to grant recipients so they know in advance what funds they will receive across a multi-year grant agreement, providing they spend double the grant amount on eligible expenses.”
Changes a “shock” to SMEs
Perkins maintains, however, that the possibility of a smaller grant than usual was not made clear to businesses.
The first she heard of it was in an email from Austrade on December 23, 2021, which explained that the grants allocated to each business would likely be reduced.
The email laid out the revised funding caps, which showed a significant decline.
Previously, the maximum grant amount for tier one applications was $80,000 over two years. This year, applicants can expect to receive $15,000 per financial year.
The maximum for tier two applications has dropped from $240,000 over three years to $23,000 per financial year, or $69,000 over three years.
The limit for tier three applications was previously $450,000 over three years. That is now $35,000 per financial year, or $105,000 over three years.
“It was a shock,” Perkins says.
While she believes everyone who wants to export should have equal opportunity for grant funding, she doesn’t think this was the way to achieve it.
Particularly for those applying for tier one grants, she says the amounts available now will not come close to covering the actual expenses of the work — they will barely touch the sides.
For some businesses, it’s almost not worth applying, she says.
“We’ve ended up in this really ridiculous position where everyone gets next to nothing.”