Grants Available For New Businesses – Reading Time: 12 minutes In this article, ArrowGates LLC attorney WanHsi Yeong talks about financing and offers practical advice for current and aspiring startup entrepreneurs.
Funding is undoubtedly a priority for startups. Staying true to its reputation as a business-friendly hub, Singapore offers countless programs and grants to help start-ups grow and expand their capabilities.
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However, due to the wide variety of programs and grants available, it can often be confusing and challenging for startups to sift through them and assess which one would be the best fit for their company. To make this process easier, I’ve put together a non-exhaustive guide to the most important programs and grants startups can get.
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Co-investment programs are programs in which the sponsoring organization makes an investment together with a financial sponsor or other private investors for an equity stake in a startup company.
Co-investment programs are best suited for start-up companies or startups planning to raise funds in the near future, when the requested funding is relatively large.
NRF invests S$10 million in venture capital funds that invest in early-stage high-tech companies in Singapore.
Venture capital companies have the right to buy back NRF’s shares from the fund within five years by paying back the principal and interest
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The most suitable system for your startup depends on the type of investor you are looking for and the industry in which the startup operates. For example, if you have an independent 3
Party investor and want to look for similar funding from SPRING Singapore as you would want to consider SEEDS. However, if you choose SEEDS, you must ensure independent 3
Party investor can meet the criteria defined by SPRING Singapore to enter the system. This may pose its own challenges compared to the BAS option, where Angel Investors have already approved SPRING Singapore, and therefore it may be easier for startups to enter the program.
The industry in which the startup operates is also an important factor. Most angel investors, venture capital firms and accelerators focus on specific sectors and you should approach the most appropriate sector when looking for funding. If your startup company operates in the field of medical technology, for example, the SSA program would be a good option, as the program’s Accelerators are currently focused on the development of startup companies in that field.
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As a general guideline, if your startup belongs to one of the following sectors, you should consider similar programs as follows:
Startups receive grants in the form of cash and prepaid vouchers for a variety of purposes, including improving technical capabilities, internal systems, licensing, and even international expansion.
The financial grant is suitable for startup companies that do not want to give up share capital, and for those that do not necessarily require significant funding.
70% of eligible costs for supported activities related to expansion, subject to a maximum of S$20,000 per business per financial year.
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A maximum of two applications in the fiscal year starting on April 1 and ending on March 31 of the following year.
An SME is defined as a company whose turnover does not exceed S$100 million as per the latest audited report
Eligible expenses include expenses incurred for hiring a third-party professional to develop the business in the following areas: (1) Capacity development (2) Market access (3) Human resource development.
As you can see above, there are many programs that offer funding to improve different aspects of your startup, and each program has its own pros and cons that you should consider before applying.
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For example, the Ace Startup Grant is attractive because it not only provides significant funding, but also assigns a mentor, which is essential for new startups that need guidance from more experienced people. However, the evaluation criteria for the application are strict and you must show, among other things, how your company differs from other applicants. Also, unlike other grants that can be awarded in lump sums, this grant is only awarded in two or three installments once the startup reaches certain pre-determined milestones.
Another is the Technology Enterprise Commercialization Scheme (TECS). Eligible startups can receive up to 85% or 100% of eligible costs, depending on the type of grant they apply for. The amount offered in the system significantly lightens the startup’s financial burden. However, like the Ace Grant, TECS eligibility requirements are strict, and proving the cutting edge of your technology solution can be a challenge.
If you plan to expand your business abroad, you should consider the Market Readiness Assistance Grant (MRA) and the Global Company Partnership Grant (GCP). The grant supports critical areas, such as the internationalization strategy, the development of human resources and finding collaborators from abroad. However, to qualify for a GCP, for example, you must have an annual turnover of at least S$500,000. Most fledgling startups struggle to achieve this goal. Therefore, if you want to consider expanding your business abroad, you may need to increase your sales and prove that you can achieve your goals, which can take a long time.
Overall, the purpose of your application dictates the appropriate schema type to boot. That’s why it’s important to determine which part of the business you’re applying for funding for. Here are some guidelines on what format might be appropriate to launch based on the purpose of your app:
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Perhaps the most common and best used tax incentive is the Inland Revenue Authority of Singapore (IRAS) Productivity and Innovation Credit (PIC) scheme, which runs until 2018. Eligible companies can choose whether to receive tax credits or cash payments for incurred expenses. in any of the six qualifying activities.
Tax Credit – 400% tax credits or credits on up to $400,000 of expenses per year in each of six qualifying activities.
Cash Payment – Convert eligible expenditure up to S$100,000 each year into cash at a 40% conversion rate.
In the related PIC IT and automation equipment requirements from 2016 onwards, the equipment must be “in use” when choosing cash payment
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There is another program available in Singapore that is geared more towards foreign companies and specifically the financial sector. The Monetary Authority of Singapore (MAS) calls this system Financial Sector Technology and Innovation (FSTI). It is basically a financial assistance program with a financial assistance program amounting to S$225 million for participants over 5 years of age.
The purpose of the scheme is to (i) attract financial institutions to set up their R&D and innovation labs in Singapore; (ii) catalyze the development of innovative solutions for financial institutions that have the potential to promote growth, efficiency or competitiveness; (iii) support the creation of the industry-wide technology infrastructure needed to provide new integrated services (applies to startups/technology companies)
Given the availability of programs and grants in Singapore as discussed above, startups are encouraged to explore and maximize these options to grow their business.
Before deciding whether to choose a joint investment program, a financial grant or a tax incentive, you should consider many factors, such as
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If you need advice on funding, grants and/or business documents, you can consider having a quick consultation with me where I can advise and answer your specific startup or Fintech related questions over a 15 minute phone call. discussion of the open, fixed fee of S$69 here.
This article was written by Yeong WanHsi of ArrowGates LLC and Seah Ern Xu of Asia Law Network.
This article does not constitute legal advice or a legal opinion on any matter discussed and should not be relied upon. It should not be taken as a comprehensive statement of the law and practice in this area. If you need advice or information, talk to an attorney in your jurisdiction. No person who is a member, partner, shareholder or consultant of Interstellar Group Pte. is not an Interstellar Group Pte. Ltd accepts or assumes responsibility or is liable to any person in connection with this article.
Yeong WanHsi works at ArrowGates LLC. He has extensive corporate experience, including multi-jurisdictional M&A, venture capital, IPOs, private equity, regulatory compliance, financial markets, corporate restructuring and general corporate practice. WanHsi always strives to be at the forefront of developing markets and continuously expands its capacity to cover the emerging start-up and Fintech markets. WanHsi is also the founder and philanthropist of Love Changes Nations, a charity that has spent the past 8 years volunteering in disaster-stricken countries around the world, including the Philippines, Mozambique, Pakistan, Nepal and Brazil.
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