Sourcing Funding for the New Grant

Last week we discussed the development of strategies for 2024.  A few weeks ago, the Australian Government, launched the “Industry Growth Program” as the replacement program for the highly successful “Accelerating Commercialisation Grant”.

The “Industry Growth Program” is targeted at small companies – turnover under $20 million per annum undertaking commercialisation activities within the government’s nominated “priority areas” (refer Improving Your Business Edition 030) relating to the development of innovative products, processes or services.  You can access a complimentary copy of the paper summarising the “Industry Growth Program” by our associated company, ESS BIZTOOLS by clicking here.

The grants offered are on a 50% basis.  This means that the company has to find the other 50% which in many cases means that funding options will need to be explored.

In this week’s article we discuss the options that are available under the:

• Early-Stage Innovation status –status – “Principles Test”
• Early-stage Innovation Company status under the “Gateway Test”
• Crowd Sourced Funding Equity Raising

We have discussed these fundraising opportunities as follows:

Have you heard about the new ‘Industry Growth Program’, which offers grants targeted at small companies that have undertaken Research and Development activities and are now looking for funding to complete the commercial prototype?

The Australian Government funding for the ‘Early-Stage Commercialisation’ component is a maximum of $250,000 on a 50-50 basis.

A great option is for these companies to research the process to qualify as an ‘Early-Stage Innovation Company’.

This status is available for companies under three years of age that have expenditure of less than $1 million and income of less than $200,000.

Companies under six years of age who had expenditure of less than $1 million aggregate over the last three years, and income of less than $200,000 over the last twelve months can also qualify.

If the company has satisfied this initial test, they must pass one of two remaining tests.

The ‘Principles Test’ requirements addresses the following questions:

• Is the company genuinely focused on developing for commercialisation one or more new, or significantly improved products, processes, services, marketing or organisational methods?
• Does the company have a high growth potential?
• Is the company able to scale the business?
• Does the company service a broader than local market?
• Does the company has potential to have a competitive advantage?
• This methodology of capital raising has a significant advantage to help the company to attract investors.

Sophisticated investors are able to claim 20% of their investment in the company, up to a maximum of $200,000 as a tax credit of their own taxation assessment. Retail investors obtain 20% of their investment up to $10,000 maximum tax credit.

These investors are eligible to obtain ‘Capital Gains Tax Exemption’ on the shares allocated as part of the accreditation process if they own those shares for longer than twelve months and less than ten years.

This is a way to fund the company’s share of the 50% funding.

A small company could obtain the 50% contribution that it would need to access the ‘Early-Stage Commercialisation’ grant available from the ‘Industry Growth Program’, if the company qualified for the ‘Early-Stage Innovation Company’ status.

If the company is under six years of age and has basically been involved in Research and Development activities – with turnover under $200,000 and expenditure under $1 million – the company may be able to qualify if it can accumulate 100 points under the ‘Gateway Test’.

If the company is able to produce the documentation to prove that it has a score of 100 points or more, it will be deemed to have self-assessed to be classified as an Early Stage Innovation Company.  This gives the company an edge when negotiating with potential investors because the investors receive 20% of their investment up to $200,000 for a sophisticated investor, and up to $10,000 for a retail investor as a taxation credit, and the possibility of being able to avoid Capital Gains Tax.

Points can be earned if:

• 50% of the company’s expenditure has been spent on Research and Development: 75 points
• 15% up to 49.9% of the company’s expenditure has been spent on Research and Development: 50 points
• Admitted to the Accelerating Commercialisation Program: 75 points
• Admitted to the Accelerator Program: 50 points
• Raised at least $50,000 from arm’s-length investors: 50 points
• Has a patent or a standard patent or plant breeder’s right: 50 points
• Has a registered design: 25 points
• Written agreement with an education funding organisation: 25 points

If the total score is 100 points, it has self-assessed as an ‘Early-Stage Innovation Company’, and can finalise negotiations with investors who will be able to apply for the special benefits in their subsequent taxation returns.

The ‘Commercialisation and Growth’ component of the new ‘Industry Growth Program’ will create a funding problem for many successful applicants, which could be solved by the company utilising the ‘Crowd Sourced Funding Equity Raising’ process to raise the company’s 50% share of the costs being partly paid by the Government.

The ‘Commercialisation and Growth Projects’ funding ranges from $100,000 - $5 million.  The applicant is required to pay 50% of the project cost, which takes a project beyond a prototype to a fully proven system that is ready for full commercial deployment.

Companies with an annual turnover less than $25 million can utilise ‘Crowd Sourced Funding Equity Raising’ as a capital raising source.  Companies that are wanting to access any Industry Growth Program are required to have a turnover of less than and $20 million, which makes Crowd Sourced Funding Equity Raising attractive for companies that are approved for support under the Commercialisation and Growth Projects segment of the grant.

To raise capital utilising Crowd Sourced Funding Equity Raising, the company needs to prepare:

• Business Plan.
• Predictive accounting reports, incorporating Budgets for each activity and the project development, Cash Flow Forecast and Projected Balance Sheets.
• Company valuation for the purposes of determining the number of shares to be allocated for the funds proposed to be raised.
• The Crowd Sourced Funding Offer Document.

The Directors and the Leadership Team need an understanding of the legislation that relates to Crowd Sourced Funding Equity Raising and in particular, an understanding of the role, duties and responsibilities of the businesses that have been appointed as a Crowd Sourced Funding Intermediary.

Depending on the amount of capital you need to raise for your company’s share of the funding the Early Stage Innovation Company capital raising or Crowd Sourced Funding capital raising are opportunities for the company to raise the matching funds.

If you would like to have a discussion about the suitability of these capital raising options for your company Towers Business Development can assist – if you would like a discussion please send an email: or Telephone 1800 232 088 and we will arrange a complimentary 40 minutes Zoom meeting.

Stay safe!