The Other Financial Source When Venturing A Business

 

There is an old business adage: money begets money, and more money begets more money. This mindset is the foundation of successful investment planning and business ventures. For small and medium enterprises (SMEs), the importance of additional investment resources and capital support is a critical variable not just in ensuring that a business will set-off but in determining how long it can continue to operate and succeed. Although market knowledge, management practices and brand-product uniqueness are also important determinants of business success, operational and logistic needs for competitive branding, advertising, and positioning, enlistment of competent managers, professional workforce and other operational dimensions require financial capital to accomplish. This is all the more true in today’s highly competitive business environment where global acceptability and technological capacity have become new parameters for business success.

 

As such, start-up SMEs almost always requires financing.  They usually get additional resources from a variety of sources. Investment financing involves the selling of parts of a business to investors who in turn take shares in the eventual profits or losses of business. Crowdfunding is asking a number of people to chip-in through either small amounts or donations and then pooling these donations to reach a target with a promise to return money to donors. But the more traditional sources are loans or credits provided by banks and other lending institutions with arrangements for monthly repayments at a rate of interest until payment is completed.

Recently, however, government funding for SMEs are now becoming a viable source of additional capital support. These funds usually take the form of grants, money that is awarded for a specific project without the need for repayment. Although there are a few government grants to support growth through capital investment and job creation, the more common government support rarely include infrastructure costs. Instead, these grants are devoted to capacity-building or capacity development raising product or service standards, technology adoption and innovation, productivity improvement strategy development, staff development, overseas expansion and other areas in training, certification, and equipment purchases.

 

Grants for productivity and growth usually provide financial assistance to accelerate the business expansion through the adoption of ICT solutions. There is also research and development (R&D) funds that provide finance for exploration of potential other growth areas and direction including feasibility studies for overseas expansion and global market readiness studies.   Recently, grants for environmental conservation, women empowerment, and corporate social responsibility have also become available. These are grants that aim to make SMEs more socially relevant in ecological protection, energy efficiency, providing more job opportunities for women or those that aim to immediately benefit local communities.

 

Given their range, availing these government and R&D funds usually involve meeting a strict set of criteria for qualification and a strict selection process. Such government funds are also very limited and thus the competition is very steep. Normally though, priorities for such assistance are SME’s in the economically disadvantaged area or those with high employment rates. SME’s with a clear idea or proof of concept and development are likely to receive innovation support while established SMEs particularly those in the high-tech industry are prioritized for R&D funds and other intellectual property and patenting assistance. Companies that aim to improve energy efficiency and reduce environmental impact are the primary target of energy and environmental funds.