Free money for growth – part one

The credit crunch has certainly put a kink in the funding feeder channels for many businesses. But one source of growth capital could yet come to the rescue – government assistance. JAMES THOMSON and MIKE PRESTON point your business towards more than 90 ‘

By James Thomson and Mike Preston

Free money for growth

Here at SmartCompany we’ve been banging on about the need to continue to grow, even though economic conditions have taken a turn for the worse.

Easy to say – not so easy to afford.
With banks rationing credit and private investors nervous about parting with funds, finding the money for that new export push or R&D program is not easy.
But there is an answer to the funding drought – government assistance.
This week at SmartCompany we will be presenting a two-part special on government assistance, with advice on how a government grant can change your business, how to apply for assistance, the costs involved and the obligations you’ll face. Most importantly, we’ll be providing information on more 90 state and federal government programs you may be able to tap into.

Before you consider applying for a government grant or subsidy, it’s important to understand what governments are hoping to achieve by handing out taxpayer funds to companies.

Government assistance is designed to help companies grow – it will not provide start-up capital, get you through a cashflow crisis or help you pay creditors. In fact in many cases grants are made in the form of a refund or credit for money already spent.

The process of applying for these refunds can be long, difficult and costly, and often the refunds take up to 12 months to be approved and paid. (For more on the cost and obligations involved in applying for government assistance, come back on Thursday for part two of our free-money special).

Despite this, government assistance has proved vital in helping many small businesses take that next step.

Paul Chapman, managing director of Australian Turntable Company, describes the Federal Government’s R&D tax concession as “a lifesaver”. His company makes giant turntables that are used in everything from revolving restaurants to disabled facilities. The company is constantly involved in R&D – every job that comes in needs a customised solution. “We might do a job with exactly the same motion for the mining industry and the exhibition sector, but they need very different specifications,” Chapman says.

With such a large R&D spend, the tax concession has become crucial to the company’s financial health. “The R&D offset has at times kept us afloat. It’s been wonderful to call upon,” Chapman says. “To stay at the front of our industry – that’s where we are – we have to continue to do R&D. Because we are industry leading, new jobs come to us and because of that we create more jobs.” The firm’s workforce has expanded from two to 22 in the last few years and there are three more jobs about to be advertised.

David Bennett, managing director of environmental services company Aquabiotics, used the Federal Government export market development grant (EMDG) to take his company’s rust-removal product offshore. In Bennett’s industry, most new business is done at industry trade shows; without the export grant, Bennett would not have been able to reach key markets such as the United States or Britain.

“It certainly makes a difference in our thinking and planning,” Bennett says. “Exporting had a very different impact on our sales and our profitability.” He estimates sales have risen 30% since joining the EMDG program.

For Adam Steinberg from Embed International, getting access to an export grant meant speeding up the growth of his company, which sells card-based data management applications for the leisure sector.

Establishing an overseas beachhead through appointing representatives and attending trade shows in key markets was something Embed knew it would have to do, but funding that move was difficult in the early days of the business. “Certainly (the grant program) gives you the confidence to make those decisions when times are tougher,” Steinberg says.

So where should you start to tap into the rich vein of government assistance?

As you will read in the SmartCompany guide, the majority of government assistance programs can be put into three categories – business advisory services (commonly aimed and small and medium businesses); export development; and research and development.

In most cases, there are extensive online resources to help you understand how the various programs work, but you may also need help to work through the complexities and understand your obligations.

Three good places to seek help are:

  • Accounting firms. Your friendly accountant should be across some of the bigger government assistance programs and will be able to help you with the detailed reporting you’ll need to provide for many of the programs.
  • Industry groups. If you are a member of an industry association, find out if they can give you some information, particularly about sectoral-specific grants. For example, the Australian Industry Group runs a government funding database for its members.
  • Grant consultants. For the biggest grants – the R&D tax concession, export grants and the COMET (Commercialising Emerging Technologies) program – specialist grant consultants can help you access funding.

There has never been a better time to get your hands on some government assistance. For starters, the slowing economy means business owners need every bit of help they can get. Secondly, the Rudd Government’s decision to slash $1 billion worth of business programs from this year’s budget highlights how programs can be here one day and gone the next. Act now!

 

SmartCompany’s pick of the best grants from the Federal Government
Click on the name to link to more information.

Commercialising Emerging Technologies (COMET)

  • Who for? Early stage companies less than five years old who have innovation with commercial potential.
  • What for? Strategic planning and advice, intellectual property advice, market research, prototypes.
  • How much? Up to $120,000. COMET involves a two tier funding system, with customers able to claim $64,000 in tier one (at a rate of 80% of eligible expenditure) and $54,000 under two tier (at a rate of 50% of eligible expenditure).
  • When does it close? Ongoing.
  • We say: With the collapse of Commercial Ready, COMET is the big grant for SMEs on the cutting edge of technology. There is big dollars on offer through the program, but be aware that the application process is long and arduous. You will need to work with a COMET business adviser and you will have to pay that person a success fee if you get a grant.

Export Market Development Grants

  • Who for? Exporters that have revenue under $30 million a year and have spent $15,000 over two years on eligible export marketing expenses.
  • What for? To help with the cost of marketing expenses such as travel, marketing consultants, communications, free samples, trade fairs and overseas representatives.
  • How much? Up to $200,000. The grant reimburses up to 50% of expenses incurred on eligible export promotion activities, above a $15,000 threshold.
  • When does it close? Applications for the 2007-08 grant year opened on 1 July 2008 and close 30 June 2009.
  • We say: The most popular export grant that has been used by countless companies to start their push into overseas markets. Again, you’ll probably need to use a consultant who specialises in securing this grant, but you can wade through the paperwork yourself. The maximum amount payable under this grant dropped recently but should rise again next year thanks to a funding injection from the Rudd Government.

R&D tax concession

  • Who for? Pretty much anyone – there is something for big companies, small companies and even foreign-owned companies.
  • What for? To encourage R&D in Australia.
  • How much? Most companies can claim a deduction from assessable income of up to 125% of eligible R&D expenditure on corporate tax paid. Companies that increase their R&D spending over three years (subject to certain criteria) can claim an extra concession, called the R&D Incremental (175% premium) Tax Concession.
  • When does it close? Ongoing.
  • We say: This is the Federal Government’s big weapon in the fight to encourage R&D and it is very popular with companies big and small. The types of companies that can apply for the concession is wide and there is a range of expenses considered eligible under the program. Given this is a tax concession, you’ll have to face the extra complication of dealing with the tax office, but most good accountants will be able to give you a hand.

 

Other grants

Farm businesses – professional advice and planning grants

  • Who for? Farm businesses affected by the drought.
  • What for? To access professional advice to assist their drought management and recovery processes.
  • How much? $5500
  • When does it close? 12 June 2009

Farm businesses – exceptional circumstances exit package 2007

  • Who for? Farmers in drought declared areas
  • What for? To help these farmers sell their land and exit agriculture.
  • How much? Up to $150,000
  • When does it close? 30 June 2009

Australian apprenticeships

  • Who for? Employers who hire an apprentice.
  • What for? To reduce training costs.
  • How much? Up to $5000 for certain occupations identified as needing skilled workers.
  • When does it close? Ongoing.

Automotive competitiveness and investment scheme

  • Who for? Automotive companies that produce over $500,000 of automotive products annually.
  • What for? To encourage innovation and investment in the automotive sector.
  • How much? In most instances, companies will be able to claim 25% of the value of new investment in plant and equipment; and 45% of the value of investment in R&D in the form of input duty credits.
  • When does it close? Ongoing until 2015.

Enhanced Project By-law Scheme

  • Who for? Companies involved in significant projects in the mining, resource processing, agriculture, food processing, food packaging, manufacturing, gas supply, power supply and water supply industries.
  • What for? Eligible goods not made in Australia or technologically superior to those made in Australia, to be imported duty free, such as equipment or stainless steel materials.
  • How much? Uncapped, but eligible projects must have total project expenditure on capital goods of $10 million or greater.
  • When does it close? Ongoing.

Business Enterprise Centres

  • Who for? Small businesses
  • What for? Business advice, planning, benchmarking etc.
  • How much? The BECs provide low-cost planning and advisory services
  • When does it close? On going

Enterprise Connect

  • Who for? SMEs of all types can apply, although there are specific centres dedicated to manufacturing, clean energy and mining.
  • What for? Business reviews, mentoring and assistance in accessing government programs.
  • How much? The Enterprise Connect centres provide low-cost advisory services.
  • When does it close? On going.

Ethanol production grants

  • Who for? Australian ethanol producers making ethanol from biomass feedstock, which is to be used in, or as, a transport fuel in Australia.
  • What for? To encourage use of biofuels.
  • How much? 38.143 cents per litre produced.
  • When does it close? Ongoing.

New Export Development Program

  • Who for? Australian companies who have not exported more than three times in the last three years, or have not achieved exports with a cumulative value of more than $200,000 in the last three years.
  • What for? To assist SMEs to find and prepare for export opportunities.
  • How much? Twenty hours of assistance at no charge delivered through Austrade’s overseas network in a maximum of two markets, plus coaching and assistance selecting export markets.
  • When does it close? Ongoing.

Satellite Phone Subsidy Scheme

  • Who for? People who live and work in the most remote parts of Australia.
  • What for? To subsidise the cost of a satellite mobile phone.
  • How much? Up to $1000 towards the cost of a phone.
  • When does it close? Ongoing.

Textile, clothing and footwear expanded overseas assembly provisions scheme

  • Who for? Firms that assemble garments and footwear overseas from predominantly Australian fabric and/or leather and then import them back into Australia for local consumption.
  • What for? Duty concessions for the above imported goods.
  • How much? N/A
  • When does it close? 30 June 2010.

Textile, Clothing and Footwear Post-2005 Strategic Investment Program (TCF Post-2005 SIP) Scheme

  • Who for? Textile, clothing and footwear companies.
  • What for? There are grants to two types of expenditure. Tier one expenditure includes new plant and equipment/building expenditure, trade showings and in-store promotions (brand support). Tier two grants are for research and development, including innovative product development activities. Companies must spend $200,000 on eligible expenditure to qualify.
  • How much? Up to 40% of tier one expenditure and 80% of tier two expenditure.
  • When does it close? 2014-15

Textile, Clothing and Footwear Small Business Program

  • Who for? Any textile, clothing and footwear firm with 20 employees or less.
  • What for? To help these SMEs improve their “business enterprise culture” – the nature and style of the decision-making and production processes that occur within a business.
  • How much? Up to $50,000
  • When does it close? 2016-17

Tradex scheme

  • Who for? Exporters
  • What for? The scheme provides relief to business via an up-front exemption from customs duty and GST on imported goods intended for re-export or to be used as inputs to exports. The scheme removes the need to “drawback” these charges after export
  • How much? N/A
  • When does it close? Ongoing

Indigenous grants and subsidies (various)

  • Who for? Indigenous business people
  • What for? To encourage and assist indigenous people to start and grow their companies.
  • How much? N/A
  • When does it close? Ongoing.

 

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