Growing a business is something that many founders and business owners dream about, but it is only those who have access to capital, or a solid line of credit, that have the ability to pay salaries and build teams – turning that dream into a reality.
In an ideal world, businesses would use their own revenue to grow. Using the cash generated from sales keeps the business owner in control of their growth and allows them to play by their own rules.
Unfortunately, this method of growth doesn’t work for a lot of businesses. In today’s economy, businesses either need additional capital in order to reach a point that they’re generating enough revenue to reinvest back into the business, or, they aren’t generating enough revenue to maximise their growth opportunity.
This is where the concept of private equity comes into the picture.
Ever heard of an “Angel Investor”, or a “Venture Capital” (VC) firm? These are (groups of) people who have access to the cash that businesses need in order to grow but are only ready to hand it out in exchange for an equity stake in the business they’re giving it to.
While this might sound like a sweet deal – it’s a far cry from a free lunch. A lot of the time, giving up an equity stake in a business means that the business owner is sacrificing a portion of their future profits, control and vision that they might have for their company.
Applying for government incentives or grants is a great way for a business to get its hands on some cash, without having to give away any equity for it.
Part of a government’s responsibility is to ensure that their country (or state) has a business ecosystem that thrives. In order to ensure that this actually happens, governments tend to offer a range of financial incentives to the business sector, with the hope that the businesses they incentivise will prosper.
From an economic standpoint, since different countries have various strengths and weaknesses, each government will differ in the types of activities or projects that they offer funding for. But a common goal that most governments tend to share is to increase employment opportunities through the incentives that they offer.
Because of this, government grants are normally designed to include an element of financial benefit for activities that focus on team growth and paying salaries.
Being that so many of these grants are designed to make it easier for organisations to pay employees and grow their teams, HR managers need to keep a close eye on the registers that list the available grants, so they are well placed to pick up on them as they surface.
At any given time in Australia, there can be hundreds of government grants that cover a wide range of industries, organisations and activities. Each one has its own set of eligibility criteria, and the competitive ones have their own merit criteria as well.
Many of the available grant programs are run as a once-off opportunity, while some are administered in rounds – opening and closing throughout the year.
Out of the few hundred grants and incentives that the Australian government offer, there are four schemes in particular that can be quite lucrative, have a particular focus on creating employment opportunities, and have proven to be relatively consistent over the years.
Here is a brief overview of those grants and how Australian organisations can benefit from them:
Examples of these demographics are:
These incentives are paid by the organisation’s employment services provider over a six-month period and can be scheduled to suit the organisation’s needs.
The R&D Tax Incentive was designed to assist businesses who are conducting innovative and experimental activities in order to create novel products or processes in the science and technology space.
This incentive, which can be claimed yearly and is dually administered by AusIndustry and the Australian Taxation Office (ATO), is an entitlement program that was originally established in 1985, and now provides businesses with a tax offset of up to 43.5% (depending on their aggregated turnover) on a range of eligible expenses associated with their R&D activities.
If the business is operating in a loss-making position and aren’t paying tax, there are instances where the offset is refundable (meaning, gets paid out as a cash rebate). For example, if a company is running at a tax loss and its group turnover is less than $20 million per year, if they spent $100,000 on eligible activities, they could potentially be up for a $43,500 cash rebate.
Since one of the main categories of eligible expenditure for this incentive is the wages and salaries of those involved in eligible R&D activities, there are instances where it can pay for almost half of the costs associated with bringing on new employees to conduct those eligible activities – a huge source of support for early stage business growth.
As part of their Entrepreneurs’ Programme, AusIndustry have also been offering a grant called Accelerating Commercialisation, which has been assisting Australian businesses in taking their most innovative and exciting products or services to market – for almost a decade now.
This scheme is administered in the form of a dollar for dollar matched funding grant, capped at $1 million of grant funding. It’s open all year round but is highly competitive and difficult to obtain.
While there are a series of different eligibility criteria that businesses need to meet in order to be eligible to submit an application, there are two fundamental rules that need to be met:
Certain costs associated with labour, protection of IP, business development activities and product/service trials can be covered by this grant – putting those who receive it in a strong position to hire new staff and expand their business offering.
The EMDG, which was established in 1997 and is administered by Austrade, is a grant that helps cover many of the costs associated with the marketing and promotion of Australian products or services to the overseas market.
Since its inception, the grant has been offering an up-to-50% reimbursement on costs like hiring sales representatives overseas, overseas travel, attending conferences and advertising costs. It can be claimed a total of eight times throughout the lifetime of a business and is capped at $150,000 of grant funds per application.
Just like the R&D Tax Incentive, this grant is an entitlement program and is paid out retrospectively.
The EMDG has proven to be incredibly useful for organisations that are looking to expand their offering by hiring staff to explore international markets.
After reading through the above, it is pretty clear that grants have the ability to give businesses significantly sized cash injections. But, putting all the excitement aside for a moment, it’s important to flag that applying to receive government funding is not as simple as it might sound.
Broadly speaking, there are three challenges that accompany grant applications:
1. Government bureaucracy
Just like with most government related matters, grants are notoriously guarded by endless amounts of red tape and paperwork – not to mention the additional reporting that is normally required even after the grant funds are released.
2. You’ll always need to put some skin in the game
Government grants are mostly administered in one of three ways:
In each of the above scenarios, the applicant business needs have some sort of capital to work with – a condition that many businesses may struggle to meet without having to turn to other sources of financing.
3. Many grants are competitive
While some grant schemes might be entitlements (meaning, the business is guaranteed to receive the funds if they meet certain eligibility criteria,) many of the lucrative ones (like the Accelerating Commercialisation grant we mentioned earlier) are competitive in nature, which essentially means that no grant application can ever be viewed as a ‘slam dunk’.
The success of these applications can depend on who the company is up against, industry trends and the subjective opinion of the assessor.
But, despite these challenges, equity-free cash is a rare commodity and if you can manage to jump through the government hoops, rummage together some capital and stand out from the rest of the applicants – the hard work can really pay off.
Shortcuts don’t really exist when preparing grant applications, but there are ways to address each of the three challenges that we just listed.
Each grant might have its own eligibility and merit criteria, but a lot of the content that needs to be prepared for each submission is often generic and can be copy pasted into other applications.
The same rule applies to a lot of the supporting documents that need to be submitted together with grant applications. Business plans, CVs of key personnel, financial statements and evidence of the company’s track record are almost completely generic and can be reused each time the company goes through an application.
If the right amount of time and effort is placed into the preparation and storage of these documents – future applications are almost guaranteed to be significantly easier.
Finding the capital that is required in order to secure government funding is hard – after all, the reason why you’re applying for grants is probably because you need more money!
But, a great way to encourage investors to hand over some of their ‘moolah’ is by showing them that you intend on leveraging their funds to receive government funding.
When they learn that they’re going to get way more ‘bang for the buck’ if you successfully receive the grant in question, the investor will probably feel more justified to support your venture.
A big part of preparing an application for a competitive grant is making sure that it is written with the right terminology, it scores highly against the merit criteria, and that it is an easy to understand and coherent submission.
Knowing how to structure a grant application in such a way requires specific experience and expertise, and businesses that delegate the task to someone who has applied for and obtained grants in the past, increase their chances of success.
Grants might be difficult to obtain at times, but HR managers who stay informed about the available opportunities and follow these guidelines when applying for them, will find that growing a business doesn’t have be something that is merely dreamed about – but is far more achievable than they might have thought.