Financial assistance in starting up a start-up

If you are thinking of or have recently set up a new business venture, there may be financial or grant assistance available to help you in your new venture that is completely separate from the run of the mill banking facilities and loans (presupposing of course such loans are available).

There are three main legal structures available in operating a new business. Namely, sole trader, partnership or a limited liability company. The detail of these structures is outside the scope of this article but suffice it to say that the type of structure you choose may depend on the type of business you are involved in or your attitude to financial risk and personal liability.

The 2009 budget contains provisions which were designed to encourage new business start ups. They provided for a ‘tax holiday’ for companies that were incorporated on or after the 14th October 2008 and which started a new trade during 2010. These companies would be exempt from Corporation Tax (and chargeable gains on disposal of assets used for the new trade) where the total annual liability to Corporation Tax did not exceed €40,000.00. Marginal relief could be applied where the annual tax liability is between €40,000-60,000.00. This ‘tax holiday’ would be available for each of the first three years of trading. To avail of this tax break the business must be started in the calendar year 2010.

If you are self employed and you create new and additional jobs in 2010 you may qualify for exemption of Employer’s PRSI for those new jobs. If you are approved for this scheme, it lasts for 12 months from the date you are approved. You may still qualify for this exemption if the new job you created in 2010 was before the launch of the scheme in June 2010. In order to qualify, the person you employ must be on the FÁS Work Placement Programme for at least three months and be receiving a certain type of social welfare payment for a continuous period of at least six months. The job must be a new job and be for at least 30 hours per week and last for at least six months.

Aside from the budgetary measure above, The City and County Enterprise Boards provide invaluable advice and support to local businesses. Such supports include information on training and grant aid. There are three general types of grant aid available.

Priming Grants

A business may be awarded this grant within the first 18 months of operation. The maximum amount payable under such a grant would the lesser amount of either 50% of the investment or €150,000.00. Grants of over €80,000.00 would normally prove to be the exception. (There may also subject to a 50% limit, be a maximum grant of €15,000.00 for a full time job created in respect of any employment support granted).

Business Expansion Grant

A maximum of up to 50% of the investment or €150,000.00 (whichever is the lesser) may be available. As with the Priming Grants, grants of over €80,000.00 would be the exception. If a business has received a priming grant then it would not be eligible for this grant but it could apply for a Business Expansion Grant once 18 months of either having been approved for the Priming Grant or having been paid that Priming Grant had elapsed (whichever is the later date).

Feasibility Grant

A maximum feasibility grant is payable for the S&E Region and is capped at the lesser amount of 50% of the investment or €20,000.00. The maximum feasibility grant payable for the BMW Region is the lesser of either 60% of the investment or €20,000.00. Expenditure that may be considered for a feasibility study grant could be innovation costs such as research costs or patenting costs, labour research which would be the cost of labour in carrying out research, development, or consultancy costs.

If your new business idea qualifies as a high potential start up you may be able to avail of grant aid from Enterprise Ireland. In the majority of cases, the relevant grant aid would be from the local Enterprise Boards as opposed to Enterprise Ireland. Enterprise Ireland would be involved in introducing a new or innovative product or service to international markets and be a larger scale venture. For example one that is capable of creating ten jobs in Ireland and realising exports of €1million within three to four years of starting up. To avail of such assistance the venture must be less than six years old.

Depending on the nature of your business or product you may be able to get private investment through equity investment. This could be by seasoned investors who spot potential in your business or inexperienced investors with cash to invest. As well as providing the cash injection for the business, the investors may also have invaluable business experience that they could also bring to the table. This investment would almost certainly be into a company and you would have to accept parting with a percentage shareholding of ‘your’ company. A formal Shareholder Agreement would probably also need to be put in place.

In short, there are possibilities for trying to collect cash for your business in these times rather than relying solely on banks and they may be closer to home than you think.