Australian businesses have been thrust into turbulent times in the last few months, from weaker overall consumer spending, bushfires, and now the health crisis of COVID-19. We’ve highlighted assistance programs announced by the Federal Government here. However we’ve noticed that start ups and other small to medium-sized businesses may still fall through the gaps where these businesses may not have revenue to qualify.
Private funding sources such as venture capitalists or other high net worth angel investors have started to pull back from deals, and these are causes for further stress in an already stressful period.
Existing assistance packages fall into two themes: funding to increase cashflow, and measures to reduce expenses. This article highlights some of the funding sources to increase the cashflow into your small business.
- Job Keeper payment – a flagship wage subsidy plan to allow employers to access to $1,500 subsidy per fortnight for up to six months to pay an eligible employee. Eligible businesses with an aggregated turnover of $1 million must be able to show a 30% fall in turnover relative to 12 months prior. To prove this, businesses can reference the fall in turnover in the course or a month or quarter, depending on the BAS reporting period. However, businesses that don’t meet the criteria will rely on the tax commissioner’s discretion – for example:
- Start ups that did not exist 12 months ago
- Start ups that are scaling up at a rapid rate
- Businesses involved in a large interim acquisition
- Businesses that typically have highly variable turnover or can show why turnover is not representative of usual or average turnover
- Businesses that have slightly less than the 30% threshold
- In these instances, the Tax Commissioner will have the discretion to consider additional information or apply alternative tests to establish eligibility. To apply, businesses can enrol with the ATO using the Business Portal and authenticate with myGovID from 20 April 2020.
- Cashflow boost – temporary tax-free cashflow support of between $20,000 to $100,000 for SMEs that employ staff. This will be done through two sets of boosts from 28 April 2020, and delivered through the credits in the activity statement system when businesses lodge their activity statements. Eligible SMEs must have held an ABN on 12 March 2020, continues to be active, have a turnover of less than $50 million and have made eligible payments where the business is required to withhold from even if the amount is $0 (e.g. salary and wages, director fees, termination payments, voluntary withholding from payments to contractors). See this for more information on eligibility and how to calculate the cash flow amount received.
- Coronavirus SME guarantee scheme – the government will provide a guarantee of 50% to eligible lenders for new unsecured loans to be used for working capital, up to $250,000 per borrower (plus interest). These loans will be up to three years, with an initial six month repayment holiday, and will be unsecured finance, meaning that borrowers will not have provide an asset as security. However, lenders will retain the decision whether to extend credit or manage the loan. Loans must be approved by 30 September 2020 in order to be covered by the guarantee. Your financial institution will have more information. For further details about participating lenders, see here.
- Research and Development Tax Incentive – this is an existing federal program for start-ups and SMEs to access a 43.5% refundable tax offset, which is essentially a cash payout. Start-ups or businesses that have engaged in R&D activities in the previous financial year, and have spent more than $20,000, are eligible to recoup your investment through this program. Typically the due date for registration is 30 April each year, however due to the impacts of the COVID-19 crisis, this has been extended to 30 September for FY19 claims. Please click here for further information on the R&D program.
- Export Market Development Grant Program – this existing program provides a cash refund for various expenses related to overseas marketing, including overseas marketing trips, patent and trademark expenses, and overseas advertising, including online such as Google ads and Instagram. The grant pays out up to $150,000 each grant year, and businesses are able to apply up to 8 times. The program opens on 1 July this year. In light of the COVID-19 crisis and its impact on exporters, the program’s requirement for export sales for grants 3 onwards has been temporarily suspended for the 2020 grant year. Please click here for further information about the EMDG program and updates here.
- Accelerating Commercialisation Grant – this existing competitive grant of up to $1million is available for businesses that have a novel product, process or service they wish to commercialise. This is a matched funding program, so businesses must be able to fund the same amount requested through the grant program. This program is open at all times for applications, with an Expression of Interest the first stage of the program. Please click here for further information.
- Business Growth Grants – available for businesses who have received a Business Management plan (which is an element of the Entrepreneur’s Program). This grant provides between $2,500 to $20,000 to improve specific business areas as recommended in the plan within 1 year. It is a matched funding program. For more information, click here.
Different state governments have also issued various packages to assist businesses.
- NSW Government – small business support grant of up to $10,000 for unavoidable business costs that are not covered in other NSW and Federal financial assistance. This applies to SMEs with a turnover of more than $75,000.
- NT Government – small business survival fund as an immediate payment for businesses affected by the social gathering restrictions and physical distancing requirements in response to the COVID-19 pandemic. It applies to businesses that can demonstrate significant impact to turnover, staffing levels and fixed and operational costs.
- QLD Government – the business assistance finder helps SMEs to find a range of financial assistance. An example is the Market Diversification and Resilience (MRDG) for agriculture, food, forestry and fishing exporters to diversify into new markets through grants of up to $7,500 for new equipment and up to $50,000 for project activities.
- SA Government – $10,000 emergency cash grants for small businesses with a turnover of more than $75,000, to fund the operation of the business
- TAS Government – a number of support grants for small businesses are available on the Tasmanian government’s website. This includes the business continuity grant ($750), emergency support grant ($2,500), hardship grant ($10,000) and business support loach scheme ($20,000 to $250,000).
- VIC Government – the business support fund of up to $10,000 for businesses in hospitality, tourism, accommodation, arts and entertainment, and retail.
- WA Government – small business relief of $17,500 for SMEs with a payroll between $1million and $4 million.
Local governments and council may also be offering some financial relief to help SMEs. It’s best to check your local council’s website to see if they can provide assistance. For example, in the City of Melbourne local council area, the local economic stimulus package includes COVID-19 grants, which provides $5million for SMEs to invest in online and e-commerce capabilities, take part in training and professional development, and undertake capital works.
Industry and Private funding sources
To supplement the various government measures, there are also a whole range of industry or private funding sources. Here’s a sample of a few that we’ve found:
- Medical Device Partnering Program – this program helps connect medtechs to connect with commercialisation and technical experts, and can fund an R&D project to develop the product. More information here.
- CSIRO Kick-start – matched funding for start-ups and SMEs to help access CSIRO’s research expertise and capabilities to help grow your business. The program provides matched funding between $10,000 and $50,000. More information here.
- Antler COVID-19 Call competition - global early-stage VC Antler is investing up to US$500,000 in up to 5 start-ups, anywhere in the world, who are tackling problems created by the COVID-19 outbreak. More information here.
- Facebook Small Business Grants – up to 30,000 eligible small businesses in more than 30 countries will be able to receive a grant to help manage disruptions. Eligible businesses must have between 2-50 employees, been in business for over a year, and have experienced challenges from COVID-19. Facebook are still determining eligibility for Australian businesses, but you can add your details to their email list and be the first to receive updates. More information here.
If you would like any further assistance navigating this landscape, please contact Glasshouse Advisory.
Authored by Shelly Ngo