There are a number of grants and financial assistance schemes available to small businesses and new ventures in Ireland that have the potential to get these companies off to a roaring success. Assistance might come in the form of grants, corporate tax relief or loans and the funding often originates directly and indirectly from government agencies in Ireland and Europe.
Despite some of these specialised sources of funding, such as the Knowledge Development Box, being well publicised at the time of their launch, a report in the Irish Times suggested that only 11 per cent of small and medium-sized businesses know about the availability of such grants.
There is a wide array of financial assistance available to start-ups and small businesses especially for those involved in the digital, technology ad R&D space.
A number of the initiatives, mentioned below, are delivered through the Local Enterprise Office (LEO), a group of 31 teams spread across Ireland’s Local Authority network. The mission of the LEO is to provide assistance to anyone interested in starting up a new business or already in business. This includes entrepreneurs, early stage promoters, start-ups and small business looking to expand.
Trading Online Voucher Scheme
The Trading Online Voucher Scheme helps small businesses to get set up trading online. Eligible businesses can apply for a voucher to invest in developing their e-commerce capability, up to the amount of €2,500. This upper limit depends on the business matching the same amount of funding to develop the online trading component of their business.
As well as funding, the scheme provides advice on various topics, including developing a website, digital marketing, social media for business and search engine optimisation. According to the Local Enterprise Office network, businesses that participated in the scheme saw:
- Sales increase by 20% on average
- Leads increase 80% on average
- Three in five get involved in exporting for the first time.
To be eligible, companies must have no more than 10 employees, less than €2 million in turnover and they must be trading for at least 12 months. They must also be located in the region of the local enterprise office to whom they are applying, a common stipulation when dealing with the LEO.
Another form of assistance that comes from the LEO is a Priming Grant. This start-up grant is available to micro enterprises within the first 18 months of starting up.
Businesses that are in their LEO’s geographic area that are employing up to 10 employees and are manufacturing or are providing internationally traded business services, can apply for a Priming Grant.
One asset that could work in a business’s favour when applying for this grant is if their business has the potential to trade internationally.
If successful in winning the grant, the business can use it to fund job creation in the form of salary costs (if the is average €10,000 per person). Companies can also use the grant to fund the development of their website, expenses related to trade fairs etc. and any export activities.
Funds from a Priming Grant can also be used to cover up to 50% of costs towards manufacturing and industrial equipment.
Businesses could potentially avail of a Priming Grant of up to €80,000 depending on the number of jobs created.
Feasibility Study Grants
The purpose of a Feasibility Grant, sometimes known as a High Potential Start-Up Feasibility (HPSUF) Grant, is to help a new company or entrepreneur investigate the viability of a new export-orientated business. If the opportunity does turn out to be viable, then the study can go on to advise the business on how to prepare ‘investor ready’ plans and any other financial advice or mentoring that the business or entrepreneur might require.
In order to be eligible for funding for this grant, the business or entrepreneur must be working towards providing an innovative technology or services offering. Furthermore, this grant is for a business entity that expects to achieve a €1,000,000 in sales in a year and create at least ten full time jobs.
Facilitated through Enterprise Ireland, the maximum grant funding available for a HPSUF grant is 50% of eligible expenditures and is capped at €15,000. This means that if the total expenditure of a Feasibility Study is €30,000 then Enterprise Ireland could put up half of this.
Sometimes a business isn’t in a position to avail of grants or bursaries, but may be suitable to enter into a Microfinance Loan agreement with the creditor, such as the LEO.
The LEO has the power to offer unsecured loans from €2,000 up to €25,000 for a term from 3 to 5 years with a reduced interest rate of 6.8% APR for LEO clients. These conditions and the LEO’s mention of “flexibility on repayment terms” could be a more favourable condition for start-ups than applying for a loan with a traditional lender. The loans are provided and underwritten by Microfinance Ireland.
Businesses from all industries are allowed to apply for this loan. Sole traders, partnerships and limited companies with fewer than 10 employees and an annual turnover of less than €2 million are eligible to apply.
Three-Year Corporate Tax Exemption
As part of Budget 2016, the three-year tax exemption was extended for another three years and is set to end at the end of 2018.
As explained by a budget update by Chartered Accountants, ”This tax relief reduces corporation tax on the profits of a new trade and gains on disposal of any assets used for the purposes of the new trade by the amount of PRSI paid for each employee, subject to a maximum of €5,000 per employee and an overall limit of €40,000 in the first 3 years of trading.”
Innovation Voucher Initiative
A business that wishes to explore a venture, or opportunity or ‘problem’ with the help of a registered knowledge provider can apply for a €5,000 innovation voucher from Enterprise Ireland.
Eligible SME companies can use a total of three vouchers, but one of them must be a 50-50 co-funded Fast Track voucher. In this situation, the company contributes 50% of the project costs in cash.
Through this scheme any SME that can benefit from the R&D and problem-solving resources of third-level institutes for one off projects, without having to considerably invest in long term research resources of their own.
In 2016, the renowned pitchathon Voom, which sees the most innovative start-ups compete for a chance to pitch their winning idea to sir Richard Branson, opened entries to Irish businesses.
Next year, Irish businesses will once again have the opportunity to be in the running for one of two winner’s spots. This year, two businesses each walked away with a cash prize of €63,000 to help grow their business and mentoring from Virgin and from VOOM Professionals recruited from LinkedIn. Winners also received a Virgin Media Business broadband package, with speeds of up to 400Mbps.
Irish firm FoodCloud took the runner-up spot in Voom 2016, surpassing nearly 5,000 entries in the process.
Knowledge Development Box
The Knowledge Development Box is an Irish corporate tax incentive that was born out of the Budget released in late 2015. The Knowledge Development Box was introduced to make foreign direct investment in Ireland and starting a home-grown Irish business more attractive.
Under the scheme, a tax rate of 6.25% applies to profits from patented inventions and copyrighted software that are the result of qualifying research and development activity in Ireland.
An example of a company using the knowledge box to it’s full potential would be if a medical technology company developed a new software for MRI machines, having come up with the idea thanks to R&D conducted in Ireland. Any profits that are made on the back of this particular service are taxable at the low rate of 6.25%.
If a business were to conduct only 50% of the product or services’ R&D in Dublin, then only 50% of those profits would be eligible for the 6.25% rate.
The eight examples of support for businesses that have been mentioned in this article show that there is certainly assistance available for start-ups and small businesses in Ireland, especially if their products and services are geared towards innovation and technology.
However, although Local Enterprise Offices created 3,500 local jobs in 2015 thanks to the growth and development of new businesses, more than 60% of SMEs feel the Government isn’t doing enough to support their business.
In the end, these financial incentives designed to help companies that are active in the digital and technology spaces are just one part of the puzzle that facilitates job creation in Ireland. An enthusiastic and skilled workforce, top of the line ICT infrastructure such as high-speed business broadband and inspired entrepreneurs will always be the key components of successful businesses.