A Guide to the 5 Types of Government Funding
One of the biggest culprits of funding fatigue or burnout is entrepreneurs approaching the wrong funder or applying for funding that they simply do not qualify for.
To help entrepreneurs to avoid the runaround – Alice Leah, operations manager at Finfind, an online aggregator of lenders and funding solution offering access to finance for small businesses, offers a guide to government funding and grants.
These grants are usually not repayable. The government lending agency provides for 100% of the financial need. However, these types of grants are significantly less common and tend to be once-off opportunities to assist new businesses.
2. Cost-sharing Grants
A cost-sharing will finance from 35% to 100% of the application. Grants that are less than 100% require you to fund the balance of finance required for the project at hand.
Many incentives are actually grants in that you do not have to repay the money. However, unlike grants, where the money is provided for the service or asset, incentives are paid AFTER the event has occurred. That is, you have to fund the approved project and then claim back the portion of the project that the incentive addresses.
4. Tax Incentives
A tax incentive means that the business may deduct a certain amount from the money it owes in tax. The government offers tax incentives to encourage businesses to engage in specified activity (such as employing young people) for a certain period of time.
5. Equity Funding
Equity means that the government funding agency buys a certain part of your business in return for percentage shareholding. The equity provides you with the finance to grow the business and the investor recieves a share of the profits and a lump sum when they exit.