According to Ernst & Young’s G20 Entrepreneurship Barometer, Australia is one of the leading countries in the world for entrepreneurship. This is due to its education and training, tax and regulation, entrepreneurship culture, co-ordinated support between public, private and voluntary sectors and its ample access to a range of different funding options. These options include everything from self-funding, crowd-funding and contra-service swapping to seed and angel investing, bank loans and venture capital. (You can read Jo Burston’s guide to alternative funding strategies here.) But in addition to the more general funding types, there are a few more options available specific to Australia.
The Australian Federal Government invests nearly $3.5bn annually in grants and assistance programmes, most of which are targeted towards entrepreneurs and SMEs. These can provide between 50% and 80% of the necessary funds to start a business, introduce new products or increase competitiveness. The programmes include the Entrepreneurs’ Infrastructure Programme, Small Business, Manufacturing, Regional Development, Innovation, Import and Export Assistance and Collaboration, and also feature funds specifically for Industry Skills and Growth amongst other topics. The Federal Government website has a helpful by-category breakdown of their programmes. For expanding companies, there are also regional-specific grants and grants for apprenticeships, flexible work arrangements, tourism and Commercialising Emerging Technologies (COMET).
Government grants can be beneficial to young companies, because they allow a lot of autonomy and can be one-time, renewable, conditionally repayable or as a part of an equity financing scheme. Typically, when receiving a grant, you won’t have to repay the grant or accumulate interest on it, guarantee specific financial returns on investments made or relinquish any control, ownership or equity. However, it is normal for recipients to be required to adhere to formal reporting requirements and complete audits.
The Federal Government offers a series of tax incentives such as tax reimbursements and credits, payroll rebates and the R&D Tax Concession. This enables companies to deduct up to 125% of expenditure incurred on R&D activities from assessable income. It also allows for small businesses claim a cash rebate for the expenditure incurred. In addition, there are different business incentives. These include government insurance against business risks, relocation incentives and access to resources, support and information available.
Outside of Government help, several of the larger Australian banks will provide low or zero-interest loans to businesses starting out, on an unsecured basis and at competitive rates. They are often directed towards specific demographics. These include young or female entrepreneurs, certain industries or geographical locations.
Crowd-funding platforms have also been credited by entrepreneurs as an irreplaceable resource. In addition to international platforms, Australia has its own range of crowdfunding sites including Pozible, VentureCrowd, IndieGoGo and Crowdfundit. As with any investor, however, there are both risks and rewards to crowdfunding. These should be considered before jumping on board.
Ultimately, each new business can decide which funding source will work best for them based on their preferences, obligations and clientele. Choosing where your funding comes from is a crucial decision in defining your business and its purpose. There is no substitute for doing the research and finding the solution which fits your individual situation.