The small business grants you could be taking advantage of

Sometimes it truly is not who you know but what you know – like which small business grants you might be eligible for, and how they could put some extra wind in your sails.

There are a host of government grants available for small businesses looking to innovate or grow, and used properly they could be the difference between a dream and a reality.

For instance, after the 2011 tsunami wiped out many of Japan’s seaweed farms, Lucas Evans (pictured below) saw an opportunity to develop a market for New Zealand’s invasive Undaria seaweed as an edible delicacy.

Evans’ Coromandel-based business, Wakame Fresh, is now using a $75,000 Sustainable Food & Fibre Futures grant (SFF Futures) from the Ministry for Primary Industries to work out if it’s commercially viable to harvest, process and export edible seaweed products (‘wakame’) to Japan.

Evans says securing the grant has been a game changer.

“The grant has provided us with the opportunity to develop a comprehensive approach to assessing the feasibility of exporting New Zealand wakame to Japan,” Evans says.

Wakame Fresh invested $114,000 into the project as a co-investment. It is now looking to identify other suitable funding pathways to support future steps.

Small business grants to take advantage of

Available small business grants in New Zealand

Not all grants are suitable for all small businesses but here are some of the key grants you could consider applying for:

Getting Started Grant: Provided by New Zealand’s Innovation Agency, Callaghan Innovation, these grants are designed to “give you a kick-start” and take your business idea from development through to commercialisation. Grant recipients receive 40% of their eligible research and development (R&D) project costs, up to $5,000. You can find out more here.

Project Grant: This Callaghan Innovation grant is for larger or more challenging R&D projects. Again, it can cover 40% of eligible R&D costs but it’s not capped at $5,000. For further information, including eligibility criteria, head here.

Provincial Growth Fund (PGF): If you’re operating in regional areas of New Zealand you may be able to tap into funding under one – or more – of the following categories: regionally-focused projects, sector-focused projects and infrastructure-based projects. You can apply here.

International Growth Fund: For those offering a product or service that is not business-as-usual, and looking to do business overseas, New Zealand Trade and Enterprise offers up to $900,000 in funding. It’s a co-investment initiative which requires you to stump up 60% of the investment. You can find out more here.

He Tupu Ōhanga – Commercial Advisors Scheme: Offered under the Te Pūnaha Hiringa: Māori Innovation Fund, successful Māori collectives are granted up to $60,000 to work with a commercial advisor for up to 18 months. Find out more here.

Regional Business Partner Capability Voucher Scheme: This voucher scheme subsidises registered business training and coaching services for eligible small businesses by up to 50% (capped at $5,000 per annum).

Small business grant application tips

There are plenty of small business grants on offer, all with varying criteria and application processes, but how do you successfully secure one?

Evans’ advice to other businesses is to do some groundwork before applying.

“You’ve got to ensure that you’re spending public money in an appropriate way and managing it properly,” he says.

“People really need to prepare for that by having a business plan, and putting governance and financial arrangements in place.”

And while a grant application process can help you bolster your own business plan, Evans says you should be wary not to unnecessarily overhaul your business’s M.O. in order to meet certain application criteria.

“There’s a risk in finding yourself bending your approach to meet the requirements of a grant pathway or funding pathway,” Evans says, “because with funding comes a number of obligations.”

That said, looking back on the process, Evans says the funding has been a significant boost for Wakame Fresh.

“It’s played a critical role in mobilising and engaging stakeholders,” he says.

If you’re not eligible for a small business grant, but you still need funds for your next big step, then there’s always a Prospa Small Business Loan. Find out more from a Prospa business lending specialist by calling 0800 005 797.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.

How you can use recent tax changes to fuel innovation

New Zealand has always punched above its weight when it comes to innovation and two new tax policies are aimed at further helping small businesses to continue to do so.

The new policies are aimed at reducing some of the risk of trying new things in your small business, making it easier to finance new methods and products, and are set to be in effect from the start of the 2020-2021 financial year.

So, if you’ve got a bright idea burning away at the back of your mind, now could be the time to start planning how to put these new incentives to work for you.

Tax credits for R&D

KPMG New Zealand Director, Byran Theunisen, says one of the most attractive incentives for small businesses is a new research and development (R&D) tax credit.

“Businesses will get back 15% of what they spend on qualifying R&D through a reduction in their tax bill,” he says.

To qualify, the R&D effort must be conducted systematically with the purpose of creating new ways and better processes, and services or products. It could be a new healthcare app, an algorithm or an improved method of manufacturing. Businesses must spend at least $50,000 on the R&D in a financial year for it to qualify.

Costs that are eligible for the tax credit include employee wages, depreciation on the R&D assets or the cost of plant used for the venture.

Theunisen says in addition to tax credits, businesses can also access the existing R&D grant funding, and expert and scientific assistance through Callaghan Innovation, including incubators, accelerators and researchers.

Through the combination of Callaghan Innovation and another government agency, New Zealand Trade & Enterprise, there is support for business planning and development, technology and market testing, as well as connections to international markets and capital.

Funding the feasibility ‘black hole’

In September 2019, the government also announced that from the next financial year onward, tax deductions would be available for “feasibility expenditure”.

This is money spent on pursuing a new process or product which does not ultimately lead to a depreciable asset for the business. Traditionally, these costs have not been deductible for tax purposes, making them known as black hole expenditure.

KPMG Tax Partner, Darshana Elwela, says feasibility expenditure is costs incurred to determine the practicality of a new initiative.

“This is where a business is looking to invest in a particular asset, either to construct or acquire a piece of plant and equipment, and there are costs associated with exploring how they do that,” he says.

“It will help businesses to make investments by providing greater certainty over the tax treatment of their project costs.”

Under the new rules, businesses will be able to write off the entire cost of any feasibility expenditure up to $10,000 in the same financial year. For larger sums, the expenditure can be written off over a period of five years.

Kirk Hope, the CEO of small business peak body BusinessNZ, says the current cost of exploring new enterprise is a “significant barrier to innovation”.

“This new tax rule will make it easier for more businesses to innovate and become more productive,” he says.

The type of costs that can be written off under feasibility expenditure include seeking relevant professional or expert advice about a new initiative, market research on a new product or market segment, or engineering surveys and environmental studies for a new building.

For instance, a café that is hoping to open a new location might hire a contractor to survey foot traffic flows in different areas to help it determine which area is the most suitable. Under the new rules that expenditure would be deductible.

Got your own bright idea for innovation? Talk to Prospa about how a small business loan could help turn the idea into reality.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information